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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-Q


(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-38898


Applied Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware

81-3405262

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

545 Fifth Avenue, Suite 1400

New York, New York 10017

(212) 220-9226

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)


Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001

APLT

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

  

  

Smaller reporting company

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of May 10, 2021, the registrant had 26,081,444 shares of common stock, $0.0001 par value per share, outstanding.


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Page

Special Note Regarding Forward-Looking Statements

2

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

4

Condensed Balance Sheets

4

Condensed Statements of Operations

5

Condensed Statements of Comprehensive Loss

6

Condensed Statements of Stockholders’ (Deficit) Equity

7

Condensed Statements of Cash Flows

8

Notes to Condensed Financial Statements (Unaudited)

9

Item 2.

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

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

76

Item 3.

Defaults Upon Senior Securities

76

Item 4.

Mine Safety Disclosures

77

Item 5.

Other Information

77

Item 6.

Exhibits

77

Signatures

78

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “opportunity,” “plan,” “predict,” “project”, “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q:

the potential impact of the Covid-19 pandemic on the timing and progress of our ongoing clinical trials, our business, results of operations, liquidity, and operations and our ability to mitigate those potential impacts;
our plans to develop, market and commercialize our product candidates;
the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and our research and development programs;
our ability to take advantage of expedited regulatory pathways for any of our product candidates;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to successfully acquire or license additional product candidates on reasonable terms and advance product candidates into, and successfully complete, clinical studies;
our ability to maintain and establish collaborations or obtain additional funding;
our ability to obtain and timing of regulatory approval of our current and future product candidates;
the anticipated indications for our product candidates, if approved;
our expectations regarding the potential market size and the rate and degree of market acceptance of such product candidates;
our ability to fund our working capital requirements and expectations regarding the sufficiency of our capital resources;
the implementation of our business model and strategic plans for our business and product candidates;
our intellectual property position and the duration of our patent rights;
developments or disputes concerning our intellectual property or other proprietary rights;
our expectations regarding government and third-party payor coverage and reimbursement;
our ability to compete in the markets we serve;
the impact of government laws and regulations and liabilities thereunder;

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developments relating to our competitors and our industry; and
other factors that may impact our financial results.

The foregoing list of risks is not exhaustive. Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You should refer to the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Unless the context otherwise requires, the terms “Applied,” “Applied Therapeutics,” “the Company,” “we,” “us,” “our”, “the registrant” and similar references in this Quarterly Report on Form 10-Q refer to Applied Therapeutics, Inc.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Applied Therapeutics, Inc.

Condensed Balance Sheets

(in thousands, except share and per share data)

As of

As of

March 31, 

December 31,

2021

2020

 

(Unaudited)

ASSETS

 

 

 

CURRENT ASSETS:

 

  

 

  

 

Cash and cash equivalents

$

84,067

$

57,466

Investments

63,992

39,363

Prepaid expenses and other current assets

 

6,347

 

5,764

Total current assets

 

154,406

 

102,593

Operating lease right-of-use asset

1,612

1,712

Security deposits and leasehold improvements

201

201

TOTAL ASSETS

$

156,219

$

104,506

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

  

CURRENT LIABILITIES:

 

 

  

Current portion of operating lease liabilities

$

415

$

406

Accounts payable

3,475

640

Accrued expenses and other current liabilities

 

15,884

 

20,189

Total current liabilities

 

19,774

 

21,235

NONCURRENT LIABILITIES:

Noncurrent portion of operating lease liabilities

1,224

1,332

Total noncurrent liabilities

1,224

1,332

Total liabilities

 

20,998

 

22,567

STOCKHOLDERS’ EQUITY:

 

  

 

  

Common stock, $0.0001 par value; 100,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 26,010,465 shares and 22,493,661 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

3

2

Additional paid-in capital

 

320,282

 

242,780

Accumulated other comprehensive loss

(154)

(112)

Accumulated deficit

 

(184,910)

 

(160,731)

Total stockholders' equity

 

135,221

 

81,939

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

156,219

$

104,506

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics, Inc.

Condensed Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended

 

March 31, 

    

2021

    

2020

OPERATING EXPENSES:

Research and development

$

14,448

$

7,271

General and administrative

9,751

5,196

Total operating expenses

 

24,199

12,467

LOSS FROM OPERATIONS

 

(24,199)

(12,467)

OTHER INCOME (EXPENSE), NET:

 

 

Interest income (expense), net

 

76

122

Other income (expense)

 

(56)

(24)

Total other income (expense), net

 

20

98

Net loss

$

(24,179)

$

(12,369)

Net loss attributable to common stockholders—basic and diluted

$

(24,179)

$

(12,369)

Net loss per share attributable to common stockholders—basic and diluted

$

(1.00)

$

(0.59)

Weighted-average common stock outstanding—basic and diluted

 

24,135,735

 

20,840,658

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics Inc.

Condensed Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)

Three Months Ended

March 31, 

    

2021

    

2020

    

Net Loss

$

(24,179)

$

(12,369)

Other comprehensive income (loss)

 

 

Unrealized gain (loss) on marketable securities

 

(42)

 

91

Other comprehensive gain (loss), net of tax

 

(42)

 

91

Comprehensive income (loss), net of tax

$

(24,221)

$

(12,278)

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics Inc.

Condensed Statements of Stockholders’ (Deficit) Equity

(in thousands, except share and per share data)

(Unaudited)

 

Common Stock

 

 

 

 

$0.0001

 

Additional

 

Accumulated Other

Total

 

Par Value

Paid-in

Accumulated

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

Deficit

BALANCE, January 1, 2020

18,531,560

$

1

$

99,378

$

(66,770)

$

(2)

$

32,607

Issuance of common stock upon secondary public offering, net of issuance costs of $714

3,152,712

1

134,127

134,128

Exercise of options for common stock issued under equity incentive plan

35,027

0

81

81

Private placement issuance costs

(41)

(41)

Exercise of warrants for common stock

249,978

Stock-based compensation expense

1,331

1,331

Net loss

(12,369)

(12,369)

Other comprehensive income (loss)

91

91

BALANCE, March 31, 2020

21,969,277

$

2

$

234,876

$

(79,139)

$

89

$

155,828

 

Common Stock

 

 

 

 

$0.0001

 

Additional

Accumulated Other

 

Total

 

Par Value

Paid-in

Accumulated

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

BALANCE, January 1, 2021

22,493,661

$

2

$

242,780

$

(160,731)

$

(112)

$

81,939

Issuance of common stock upon secondary public offering, net of issuance costs of $203

 

3,450,000

 

1

 

74,386

 

 

74,387

Exercise of options for common stock issued under equity incentive plan

 

37,400

 

 

67

 

 

67

Exercise of options for common stock not yet issued

(465)

(1)

(1)

Restricted Stock Unit released for common stock issued under Equity Incentive Plan

1,988

Exercise of warrants for common stock

27,855

69

69

Stock-based compensation expense

2,981

2,981

Net loss

(24,179)

(24,179)

Other comprehensive income (loss)

(42)

(42)

BALANCE, March 31, 2021

26,010,439

$

3

$

320,282

$

(184,910)

$

(154)

$

135,221

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Applied Therapeutics, Inc.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)

Three Months Ended

March 31, 

    

2021

    

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

  

  

Net loss

$

(24,179)

$

(12,369)

Adjustments to reconcile net loss to net cash used in operating activities:

 

Stock-based compensation expense

 

2,981

1,331

Amortization of insurance premium

990

Amortization of operating lease right-of-use assets

100

93

Change in operating lease liability

(97)

(87)

Changes in operating assets and liabilities:

 

Prepaid expenses

 

(1,573)

(2,131)

Accounts payable

 

2,835

(7,199)

Accrued expenses and other current liabilities

 

(3,270)

1,507

Net cash used in operating activities

 

(22,213)

 

(18,855)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of available-for-sale securities

(88,007)

(41,711)

Proceeds from sale of available-for-sale securities

500

Proceeds from maturities of available-for-sale securities

62,835

Net cash used in investing activities

(24,672)

(41,711)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Proceeds from secondary public offering, net of cash issuance costs of $702

134,139

Proceeds February Offering, net of cash issuance costs of $165

 

74,424

Payment of deferred offering costs

(1)

Repayments of short-term borrowings

(1,074)

Exercise of stock options for common stock under Equity Incentive Plan

 

67

81

Exercise of Warrants

69

Net cash provided by financing activities

 

73,486

 

134,219

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

26,601

73,653

Cash and cash equivalents at beginning of period

 

57,466

18,850

Cash and cash equivalents at end of period

$

84,067

$

92,503

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

  

 

  

Private placement costs in accrued expenses

$

$

40

Secondary offering costs in accounts payable

$

$

12

Unrealized gain (loss) on marketable securities

$

(42)

$

(91)

February Offering costs still in accrued expense

$

38

$

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics, Inc.

Notes to Condensed Financial Statements (Unaudited)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations and Business

Applied Therapeutics, Inc. (the “Company”) is a clinical-stage biopharmaceutical company developing a pipeline of novel product candidates against validated molecular targets in indications of high unmet medical need. In particular, the Company is currently targeting treatments for rare metabolic diseases such as galactosemia, and diabetic complications including diabetic cardiomyopathy. The Company was incorporated in Delaware on January 20, 2016 and is headquartered in New York, New York.

On May 16, 2019, the Company completed an initial public offering (the “IPO”) in which the Company issued and sold 4,000,000 shares of its common stock at a public offering price of $10.00 per share, for aggregate gross proceeds of $40.0 million. The Company received net proceeds of $34.6 million, after deducting underwriting discounts, and commissions and offering costs. Prior to the completion of the IPO, the Company primarily funded its operations with proceeds from the sale of convertible preferred stock (see Note 8).

On November 12, 2019, the Company completed a private placement (the “Private Placement”), pursuant to which it issued and sold 1,380,344 shares of the Company’s common stock at a price of $14.50 per share, for net proceeds of $18.4 million after deducting placement agent discounts and commissions and offering costs.

On January 28, 2020, the Company completed its secondary public offering, pursuant to which it issued and sold 2,741,489 shares of common stock at a public offering price of $45.50 per share, with an additional 411,223 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares. The aggregate net proceeds received by the Company from the offering, after deducting underwriting discounts and commissions and offering costs, were $134.1 million.

On June 4, 2020, the Company filed a shelf registration statement on Form S-3 (the “Shelf Registration Statement”) under which the Company may, from time to time, sell securities in one or more offerings having an aggregate offering price of up to $300.0 million. The Shelf Registration Statement was declared effective as of June 15, 2020.

On June 12, 2020, the Company entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Goldman Sachs & Co. LLC (“Goldman”), as a sales agent to sell shares of the Company’s common stock, from time to time, having an aggregate offering price of up to $100 million. Goldman may act as an agent on the Company’s behalf or purchase shares of the Company’s common stock as a principal. As of March 31, 2021, the Company has not sold any shares of common stock pursuant to the Equity Distribution Agreement.

In February 2021, the Company completed an underwritten public offering of 3,450,000 shares of common stock (the “February Offering”), including the exercise in full of the underwriters’ option to purchase 450,000 additional shares of common stock, which option closed on February 19, 2021. The shares were offered at a price to the public of $23.00 per share, resulting in aggregate net proceeds of approximately $74.4 million, after deducting underwriting discounts and commissions and offering expenses.

The accompanying unaudited condensed financial statements as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020 have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed financial statements should be read in

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conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2020 included in the Annual Report, filed with the SEC on March 18, 2021 (the “Annual Report”).

The unaudited condensed financial statements have been prepared on the same basis as the audited financial statements. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments which are necessary for a fair presentation of the Company’s financial position as of March 31, 2021 and 2020, results of operations for the three months ended March 31, 2021 and 2020 and cash flows for the three months ended March 31, 2021 and 2020. Such adjustments are of a normal and recurring nature. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

Liquidity

The Company has incurred, and expects to continue to incur, significant operating losses and negative cash flows for at least the next several years as it continues to develop its drug candidates. To date, the Company has not generated any revenue, and it does not expect to generate revenue unless and until it successfully completes development and obtains regulatory approval for one of its product candidates.

Management believes that the Company’s existing cash, cash equivalents, and investments together with the net proceeds from the February Offering, will allow the Company to continue its operations for at least 12 months from the issuance date of these financial statements. If the Company is unable to obtain additional funding, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

Risks and Uncertainties

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and reliance on third-party manufacturers.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Significant Accounting Policies

The significant accounting policies and estimates used in preparation of the condensed financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2020, and the notes thereto, which are included in the Annual Report. There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2021.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes. The new standard intended to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the

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accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to primarily be made prospectively, with some changes to be made retrospectively. The Company adopted the amendment in January 2021 with no impact on the financial statements.

2. LICENSE AGREEMENT

Columbia University

In October 2016, the Company entered into a license agreement (the “2016 Columbia Agreement”) with the Trustees of Columbia University (“Columbia University”) to obtain an exclusive royalty-bearing sublicensable license in respect to certain patents. As part of the consideration for entering into the 2016 Columbia Agreement, the Company issued to Columbia University shares equal to 5% of its outstanding common stock on a fully diluted basis at the time of issue. The common stock had a fair value of $0.5 million at the time of issuance. The Company will be required to make further payments to Columbia University of up to an aggregate of $1.3 million for the achievement of specified development and regulatory milestones, and up to an aggregate of $1.0 million for the achievement of a specified level of aggregate annual net sales, in each case in connection with products covered by the 2016 Columbia Agreement. The Company will also be required to pay tiered royalties to Columbia University in the low- to mid-single digit percentages on the Company’s, its affiliates’ and its sublicensees’ net sales of licensed products, subject to specified offsets and reductions. In addition, the Company is required to make specified annual minimum royalty payments to Columbia University, which is contingent upon the approval of the licensed products, in the mid-six figures beginning on the 10th anniversary of the effective date of the 2016 Columbia Agreement. The Company has not granted any sublicenses under the 2016 Columbia Agreement. However, if the Company sublicenses the rights granted under the 2016 Columbia Agreement to one or more third parties, it will be required to pay Columbia University a portion of the net sublicensing revenue received from such third parties, at percentages between 10% and 20%, depending on the stage of development at the time such revenue is received from such third parties.

The 2016 Columbia Agreement will terminate upon the expiration of all the Company’s royalty payment obligations in all countries. The Company may terminate the 2016 Columbia Agreement for convenience upon 90 days’ written notice to Columbia University. At its election, Columbia University may terminate the 2016 Columbia Agreement, or convert the licenses granted to the Company into non-exclusive, non-sublicensable licenses, in the case of (a) the Company’s uncured material breach upon 30 days’ written notice (which shall be extended to 90 days if the Company is diligently attempting to cure such material breach), (b) the Company’s failure to achieve the specified development and funding milestone events, or (c) the Company’s insolvency.

In January 2019, the Company entered into a second license agreement with Columbia University (the “2019 Columbia Agreement”). Pursuant to the 2019 Columbia Agreement, Columbia University granted the Company a royalty-bearing, sublicensable license that is exclusive with respect to certain patents, and non-exclusive with respect to certain know-how, in each case to develop, manufacture and commercialize PI3k inhibitor products. The license grant is worldwide. Under the 2019 Columbia Agreement, the Company is obligated to use commercially reasonable efforts to research, discover, develop and market licensed products for commercial sale in the licensed territory, and to comply with certain obligations to meet specified development and funding milestones within defined time periods. Columbia University retains the right to conduct, and grant third parties the right to conduct, non-clinical academic research using the licensed technology; provided that such research is not funded by a commercial entity or for-profit entity or results in rights granted to a commercial or for-profit entity. As consideration for entering into the 2019 Columbia Agreement, the Company made a nominal upfront payment to Columbia University. The Company will be required to make further payments to Columbia University of up to an aggregate of $1.3 million for the achievement of specified development and regulatory milestones, and up to an aggregate of $1.0 million for the achievement of a specified level of aggregate annual net sales, in each case in connection with products covered by the 2019 Columbia Agreement. The Company will also be required to pay tiered royalties to Columbia University in the low- to mid-single digit percentages on the Company’s, its affiliates’ and its sublicensees’ net sales of licensed products, subject to specified offsets and reductions. In addition, the Company is required to make specified annual minimum royalty payments to Columbia University,

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which is contingent upon the approval of the licensed products, in the mid-six figures beginning on the tenth anniversary of the effective date of the 2019 Columbia Agreement.

The Company has not granted any sublicenses under the 2019 Columbia Agreement. However, if the Company sublicenses the rights granted under the 2019 Columbia Agreement to one or more third parties, it will be required to pay Columbia University a portion of the net sublicensing revenue received from such third parties, at percentages between 10% and 50%, depending on the stage of development at the time such revenue is received from such third parties. The 2019 Columbia Agreement will terminate upon the expiration of all the Company’s royalty payment obligations in all countries. The Company may terminate the 2019 Columbia Agreement for convenience upon 90 days’ written notice to Columbia University. At its election, Columbia University may terminate the 2019 Columbia Agreement, or convert the licenses granted to the Company into non-exclusive, non-sublicensable licenses, in the case of (a) the Company’s uncured material breach upon 30 days’ written notice (which shall be extended to 90 days if the Company is diligently attempting to cure such material breach), (b) the Company’s failure to achieve the specified development and funding milestone events, or (c) the Company’s insolvency.

In March 2019, and in connection with the 2016 Columbia Agreement, the Company entered into a research services agreement (the “2019 Columbia Research Agreement”) with Columbia University with the purpose of analyzing structural and functional changes in brain tissue in an animal model of galactosemia, and the effects of certain compounds whose intellectual property rights were licensed to the Company as part of the 2016 Columbia Agreement on any such structural and functional changes. The 2019 Columbia Research Agreement had a term of 12 months from its effective date and expired in accordance with its terms.

On October 3, 2019, and in connection with the 2019 Columbia Agreement, the Company entered into a research services agreement (the “PI3k Columbia Research Agreement” and collectively with the 2016 Columbia Agreement, 2019 Columbia Agreement and 2019 Columbia Research Agreement, the “Columbia Agreements”) with Columbia University with the purpose of analyzing PI3k inhibitors for the treatment of lymphoid malignancies. The research service agreement has a term of 18 months from is effective date; provided that the Company can terminate the research service agreement without cause with at least 30 days prior written notice. Midway through the study period, the Company and Columbia University will review the results of all completed and in progress research and determine whether the research will continue. In consideration for the services performed by Columbia University, the Company will be required to pay $0.4 million to Columbia University for staffing, supplies and indirect costs.

During the three months ended March 31, 2021, the Company recorded $0 in research and development expense and $32,000 in general and administrative expense related to the Columbia Agreements. During the three months ended March 31, 2020, the Company recorded $0.3 million in research and development expense and $40,000 in general and administrative expense related to the Columbia Agreements. In aggregate, the Company has incurred $2.4 million in expense from the execution of the Columbia Agreements through March 31, 2021.

As of March 31, 2021, the Company had $32,000 due to Columbia University included in accrued expenses and $0 included in accounts payable. As of December 31, 2020, the Company had $0.1 million due to Columbia University included in accrued expenses and $0 included in accounts payable.

University of Miami

2020 Miami License Agreement

On October 28, 2020, the Company entered into a license agreement with the University of Miami (the “2020 Miami License Agreement”) relating to certain technology that is co-owned by the University of Miami (UM), the University of Rochester (UR) and University College London (UCL). UM was granted an exclusive agency from UR and UCL to license each of their rights in the technology. Pursuant to the 2020 Miami License Agreement, UM, on behalf of itself and UR and UCL, granted the Company a royalty-bearing, sublicensable license that is exclusive with respect to certain patent applications and patents that may grant from the applications, and non-exclusive with respect to certain know-how, in each case to research, develop, make, have made, use, sell and import products for use in treating and/or detecting certain inherited neuropathies, in particular those caused by mutation in the sorbitol dehydrogenase

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(SORD) gene. The license grant is worldwide. Under the 2020 Miami License Agreement, the Company is obligated to use commercially reasonable efforts to develop, manufacture, market and sell licensed products in the licensed territory, and to comply with certain obligations to meet specified development milestones within defined time periods. UM retains for itself UR and UCL the right to use the licensed patent rights and licensed technology for their internal non-commercial educational, research and clinical patient care purposes, including in sponsored research and collaboration with commercial entities.

Under the terms of the 2020 Miami License Agreement, the Company was obligated to pay UM an up-front non-refundable license fee of $1.1 million, and a second non-refundable license fee of $0.5 million due on the first anniversary of the date of the license. The Company will be required to make further payments to UM of up to an aggregate $2.2 million for the achievement of specified patenting and development milestones, and up to an aggregate of $4.1 million for achievement of late stage regulatory milestones. The Company will also be required to pay royalties ranging from 0.88% - 5% on the Company’s, the Company’s affiliates’ and the Company’s sublicensees’ net sales of licensed products. If the Company sublicenses the rights granted under the 2020 Miami License Agreement to one or more third parties, the Company will be required to pay to UM a portion of the non-royalty sublicensing revenue received from such third parties ranging from 15% – 25%.

The 2020 Miami License Agreement terminates upon the later of the expiration of all issued patents and filed patent applications or 10 years after the first commercial sale of the last product or process for which a royalty is due, unless earlier terminated. In addition, the 2020 Miami License Agreement may be terminated by the Company at any time upon 60 days prior written notice to UM, and may be terminated by either the Company or UM upon material breach of an obligation if action to cure the breach is not initiated within 60 days of receipt of written notice.

During the three months ended March 31, 2021, the Company recorded $25,000 in research and development expense related to the 2020 Miami License Agreement. In aggregate, the Company has incurred $2.1 million in expense from execution of the 2020 Miami License Agreement through March 31, 2021.

The Company had $0.5 million and $1.6 million due to UM included in accrued expenses as of March 31, 2021 and December 31, 2020, respectively, relating to the 2020 Miami License Agreement.

2020 Miami Option Agreement

On October 28, 2020, the Company entered into an option agreement with the University of Miami (the “2020 Miami Option Agreement”) concerning certain research activities and technology relating to SORD neuropathy that may be pursued and developed by UM. Under the 2020 Miami Option Agreement, if UM conducts such research activities, then UM is obligated to grant the Company certain option rights to access and use the research results and to obtain licenses to any associated patent rights upon the Company making specified payments to UM within specified time limits. If the Company elects to obtain option rights the Company will be required to make payments to UM in the low-six figures to the low-seven figures, depending upon the rights the Company elects to obtain, and the Company will be obligated to make certain milestone payments in the high-six figures to mid-seven figures if UM conducts and completes certain research activities within specified time periods and the Company elects to receive rights to use the results of that research.

2020 Miami Sponsored Research Agreement

On December 14, 2020, the Company entered into a research agreement with the University of Miami (the “2020 Miami Research Agreement”), under which the University of Miami will conduct a research study relating to SORD neuropathy and deliver a final report on the study to the Company. The term of the research agreement is from December 14, 2020 through December 30, 2021. The consideration for the 2020 Miami Research Agreement was $0.3 million.

During the three months ended March 31, 2021, the Company recorded $0.1 million in research and development expense in relation to the 2020 Miami Research Agreement. The Company recorded $0.1 million and

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$4,000 as of March 31, 2021 and December 31, 2020, respectively, in accrued expense in relation to the 2020 Miami Research Agreement.

Bayh-Dole Act

Some of the intellectual property rights the Company has licensed, including certain rights licensed in the agreements described above, may have been generated through the use of U.S. government funding. As a result, the U.S. government may have certain rights to intellectual property embodied in the Company’s current or future product candidates under the Bayh-Dole Act of 1980, or Bayh-Dole Act, including the grant to the government of a non-exclusive, worldwide, freedom to operate license under any patents, and the requirement, absent a waiver, to manufacture products substantially in the United States.  To the extent any of the Company’s current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.

3. FAIR VALUE MEASUREMENTS

The following tables summarize, as of March 31, 2021, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis, according to the fair value hierarchy described in the significant accounting policies in the Company’s audited financial statements as of and for the year ended December 31, 2020, and the notes thereto, which are included in the Annual Report.

As of March 31, 2021

(in thousands)

Level 1

Level 2

Level 3

Total

Cash

$

8,561

$

$

$

8,561

Money market funds

75,506

75,506

Total cash and cash equivalents

$

84,067

$

$

$

84,067

U.S. government agency debt securities

63,992

63,992

Total marketable securities

$

$

63,992

$

$

63,992

Total financial assets measured at fair value on a recurring basis

$

84,067

$

63,992

$

$

148,059

Investments in U.S. government agency debt securities have been classified as Level 2 as they are valued using quoted prices in less active markets or other directly or indirectly observable inputs. Fair values of U.S. government agency debt securities were derived from a consensus or weighted average price based on input of market prices from multiple sources at each reporting period. During the period ended March 31, 2021, there were no transfers of financial assets between Level 1 and Level 2.

4. INVESTMENTS

Marketable Securities

Marketable securities, which the Company classifies as available-for-sale securities, primarily consist of high quality commercial paper, corporate bonds, and U.S. government debt obligations. Marketable securities with remaining effective maturities of twelve months or less from the balance sheet date are classified as short-term; otherwise, they are classified as long-term on the balance sheets.

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The following tables provide the Company’s marketable securities by security type (in thousands):

As of March 31, 2021

As of December 31, 2020

Gross

Gross

 

Gross

Gross

 

    

Unrealized

    

Unrealized

    

Estimated

    

    

Unrealized

    

Unrealized

    

Estimated

(in thousands)

Cost

Gains

Losses

Fair Value

Cost

Gains

Losses

Fair Value

US government agency debt security

64,146

5

(159)

63,992

39,475

11

(123)

39,363

Total

$

64,146

$

5

$

(159)

$

63,992

$

39,475

$

11

$

(123)

$

39,363

As of March 31, 2021, the Company’s investment portfolio reported an unrealized loss of $0.2 million. Based on its evaluations, the Company determined that a credit loss allowance is not required since the decline was not related to underlying credit issues of the counterparties. The counterparties to these investments have high credit quality with investment grade ratings of at least AA+ or above, along with a history of no defaults. No single investment in the corporate bond portfolio had an individually material unrealized loss and in the aggregate. The total amount of unrealized losses of $0.2 million as of March 31, 2021 was only 0.24% of the total amortized costs basis of the investment portfolio. In addition, the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost bases. Accordingly, based on the foregoing evaluation, the Company did not record any credit losses during the three months ended March 31, 2021 and the entire amount of the decline in fair value below the amortized cost basis was recorded as an unrealized loss, net of tax, in other comprehensive loss in the Statements of Comprehensive Loss. Unrealized gains are also reflected, net of tax, as other comprehensive income (loss) in the Statements of Comprehensive Loss.

Contractual maturities of the Company’s marketable securities are summarized as follows:

As of March 31, 2021

As of December 31, 2020

Gross

Gross

 

Gross

Gross

 

Unrealized

Unrealized

    

Estimated

Unrealized

Unrealized

    

Estimated

(in thousands)

Cost

    

Gains

    

Losses

    

Fair Value

    

Cost

    

Gains

    

Losses

    

Fair Value

Due in one year or less

$

64,146

$

5

$

(159)

$

63,992

$

39,475

$

11

$

(123)

$

39,363

Due in one through two years

Total

$

64,146

$

5

  

$

(159)

$

63,992

$

39,475

$

11

  

$

(123)

$

39,363

At March 31, 2021, the Company had $5,000 of gross unrealized gains and $0.2 million of gross unrealized losses primarily due to fluctuations in the fair value of certain U.S. government agency debt securities.

During the three months ended March 31, 2021, the Company recorded gross realized losses of $56,000 and gross realized gains of $0 from the sale of marketable securities.

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of March 31, 2021 are as follows:

As of March 31, 2021

Securities in an unrealized loss position less than 12 months

Securities in an unrealized loss position greater than 12 months

Total

Unrealized

    

Estimated

    

Unrealized

    

Estimated

    

Unrealized

    

Estimated

(in thousands)

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

US government agency debt security

(159)

33,794

(159)

33,794

Total

$

(159)

$

33,794

$

$

$

(159)

$

33,794

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The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of December 31, 2020 are as follows:

As of December 31, 2020

Securities in an unrealized loss position less than 12 months

Securities in an unrealized loss position greater than 12 months

Total

Unrealized

    

Estimated

    

Unrealized

    

Estimated

    

Unrealized

    

Estimated

(in thousands)

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

US government agency debt security

(123)

14,073

(123)

14,073

Total

$

(123)

$

14,073

$

$

$

(123)

$

14,073

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

    

March 31, 

    

December 31,

(in thousands)

2021

2020

Prepaid research and development expenses

 

3,906

 

2,349

Insurance Premium Asset

473

1,463

Prepaid rent expenses

 

108

 

108

Prepaid insurance expenses

 

142

 

91

Prepaid Commercial and Patient Advocacy

914

968

Research and Development Tax Credit Receivable

 

500

 

500

Interest Receivable

91

5

Other prepaid expenses and current assets

213

280

Total prepaid expenses & other current assets

$

6,347

$

5,764

6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

    

March 31, 

    

December 31,

(in thousands)

2021

2020

Accrued pre-clinical and clinical expenses

$

12,314

$

13,742

Short-term insurance financing note

1,074

Accrued professional fees

 

359

 

511

Accrued compensation and benefits

 

700

 

2,103

Accrued commercial expenses

1,415

502

Accrued patent expenses

 

574

 

1,704

Other

 

522

 

553

Total accrued expenses & other current liabilities

$

15,884

$

20,189

7. STOCK-BASED COMPENSATION

Equity Incentive Plans

In May 2019, the Company’s board of directors (the “Board”) adopted its 2019 Equity Incentive Plan (“2019 Plan”), which was subsequently approved by its stockholders and became effective on May 13, 2019. As a result, no additional awards under the Company’s 2016 Equity Incentive Plan, as amended (the “2016 Plan”) will be granted and all outstanding stock awards granted under the 2016 Plan that are repurchased, forfeited, expired, or are cancelled will

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become available for grant under the 2019 Plan in accordance with its terms. The 2016 Plan will continue to govern outstanding equity awards granted thereunder.

The 2019 Plan provides for the issuance of incentive stock options (“ISOs”) to employees, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other forms of stock awards to the Company’s employees, officers, and directors, as well as non- employees, consultants, and affiliates to the Company. Under the terms of the 2019 Plan, stock options may not be granted at an exercise price less than fair market value of the Company’s common stock on the date of the grant. The 2019 Plan is administered by the Compensation Committee of the Company’s Board.

Initially, subject to adjustments as provided in the 2019 Plan, the maximum number of the Company’s common stock that may be issued under the 2019 Plan is 4,530,000 shares, which is the sum of (i) 1,618,841 new shares, plus (ii) the number of shares (not to exceed 2,911,159 shares) that remained available for the issuance of awards under the 2016 Plan, at the time the 2019 Plan became effective, and (iii) any shares subject to outstanding stock options or other stock awards granted under the 2016 Plan that are forfeited, expired, or reacquired. The 2019 Plan provides that the number of shares reserved and available for issuance under the 2019 Plan will automatically increase each January 1, beginning on January 1, 2020, by 5% of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Board. Subject to certain changes in capitalization of the Company, the aggregate maximum number of shares of common stock that may be issued pursuant to the exercise of ISOs shall be equal to 13,000,000 shares of common stock. Stock options awarded under the 2019 Plan expire 10 years after grant and typically vest over four years.

As of March 31, 2021, there were 1,089,911 shares of common stock available for issuance under the 2019 Plan.

Stock-Based Compensation Expense

Total stock-based compensation expense recorded for employees, directors and non-employees (in thousands):

Three Months Ended

March 31, 

(in thousands)

    

2021

    

2020

Research and development

$

$ 799

$

642

General and administrative

 

2,182

 

689

Total stock-based compensation expense

$

2,981

$

1,331

Stock Option Activity

During the three months ended March 31, 2021 the Company did not grant any options to shares of common stock. For the three months ended March 31, 2021 and 2020, amortization of stock compensation of options amounted to $2.5 million and $1.3 million, respectively. As of March 31, 2021 and 2020, the total unrecognized stock-based compensation balance for unvested options was $22.7 million and $15.4 million, respectively, which is expected to be recognized over 2.9 and 1.6 years, respectively. The weighted-average fair value of options granted during the three months ended March 31, 2021 and 2020 was $0 per share and $21.65 per share, respectively.

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The following table summarizes the information about options outstanding at March 31, 2021:

    

    

    

Weighted-Average

    

 

 

Weighted-

 

Remaining

 

Aggregate

Options

 

Average

 

Contractual

 

Intrinsic

(in thousands, except for share data)

Outstanding

Exercise Price

 

Term (in years)

Value

Outstanding at December 31, 2020

 

4,529,675

$

12.87

8.49

$

51,103

Options granted

 

Options exercised

 

(37,400)

1.80

776

Forfeited

 

(605)

44.02

Expired

 

Outstanding at March 31, 2021

 

4,491,670

$

12.87

8.49

$

40,339

Exercisable at March 31, 2021

 

2,698,163

$

6.59

7.78

$

35,077

Nonvested at March 31, 2021

 

1,793,507

$

22.54

8.94

$

5,262

Valuation of Stock Options Granted to Employees that Contain Service Conditions Only

The fair value of each option award granted with service-based vesting is estimated on the date of the grant using the Black-Scholes option valuation model based on the weighted average assumptions noted in the table below for those options granted in the three months ended March 31, 2021 and 2020.

Three Months Ended

 

March 31, 

    

2021

 

2020

Expected term (in years)

6.1

Volatility

 

%

68.77

%

Risk-free interest rate

 

%

0.59

%

Dividend yield

%

%

Restricted Stock Unit Activity

For the three months ended March 31, 2021 and 2020, amortization of stock compensation of RSUs amounted to $0.5 million and $19,000, respectively. As of March 31, 2021 and 2020, the unamortized compensation costs associated with non-vested restricted stock awards were $5.9 million and $1.2 million, respectively, with a weighted-average remaining amortization period of 3.2 and 3.9 years, respectively.

The following table summarizes the information about restricted stock units outstanding at March 31, 2021:

 

 

Weighted-Average

 

Aggregate

 

Grant Date

 

Intrinsic Value

(in thousands, except for share data)

Shares

 

Fair Value

As of December 31, 2021

Outstanding at December 31, 2020

 

206,529

$

36.08

4,546

Awarded

 

Released

 

(1,988)

44.02

Forfeited

 

(262)

44.02

Outstanding at March 31, 2021

 

204,279

$

36.08

$

3,831

Nonvested at March 31, 2021

 

195,163

$

35.99

$

3,831

Weighted Average Remaining Recognition Period (in years)

3.2

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2019 Employee Stock Purchase Plan

In May 2019, the Company’s Board and its stockholders approved the 2019 Employee Stock Purchase Plan (the “ESPP”), which became effective as of May 13, 2019. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S. Internal Revenue Code of 1986, as amended. The number of shares of common stock initially reserved for issuance under the ESPP was 180,000 shares. The ESPP provides for an annual increase on the first day of each year beginning in 2020 and ending in 2029, in each case subject to the approval of the Board, equal to the lesser of (i) 1% of the shares of common stock outstanding on the last day of the calendar month before the date of the automatic increase and (ii) 360,000 shares; provided that prior to the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (i) and (ii). As of March 31, 2021, no shares of common stock had been issued under the ESPP. The first offering period has not yet been decided by the Board.

8. STOCKHOLDERS’ EQUITY

As of March 31, 2021, and December 31, 2020, the authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.0001 per share and 10,000,000 shares of preferred stock, par value $0.0001 per share.

Common Stock

Equity Distribution Agreement

In June 2020, the Company entered into the Equity Distribution Agreement with Goldman to sell shares of the Company’s common stock, from time to time, having an aggregate offering price of up to $100.0 million. The issuance and sale of shares of common stock by the Company pursuant to the Equity Distribution Agreement is deemed an “at-the-market” offering under the Securities Act of 1933, as amended, or the Securities Act. Goldman is entitled to compensation for its services equal to up to 3.0% of the gross offering proceeds of all shares of the Company’s common stock sold through it as a sales agent pursuant to the Equity Distribution Agreement. As of March 31, 2021, the Company had received no proceeds from the sale of shares of common stock pursuant to the Equity Distribution Agreement.

9. WARRANTS

Warrants Issued with Series A Preferred Stock

On January 26, 2017, in connection with the sale and issuance of the Series A Preferred Stock, the Company issued equity-classified warrants to purchase 309,389 shares of common stock (the “2017 Warrants”), valued at $0.2 million, and included in the issuance costs of the Series A Preferred Stock. The warrants vested immediately and have an exercise price of $2.49 per share and expire on March 13, 2027.

The fair value of warrants issued is estimated using the Black-Scholes option pricing model with the following assumptions for the 2017 Warrants.

Contractual term (in years)

    

10.0

 

Volatility

 

74.48

%

Risk-free interest rate

 

3.20

%

Dividend yield

 

0.00

%

On February 21, 2020, two warrantholders exercised 185,634 warrants in a cashless exercise at net, and the Company issued 176,092 shares of common stock. On February 24, 2020, a warrantholder exercised 72,818 warrants in a cashless exercise at net, and the Company issued 69,094 shares of common stock.

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On February 5, 2021, a warrantholder exercised 27,855 warrants on a cash basis and received 27,855 shares of common stock. The Company received $69,000 in cash proceeds for the exercise of these warrants.

Warrants Issued with the 2018 Notes

On January 18, 2018, the Company entered into a placement agent agreement through which it became obligated to issue common stock warrants in connection with the issuance of convertible promissory notes, issued on February 5, 2018 (the “2018 Notes”). The obligation to issue the 2018 Notes Warrants was recorded as a liability at its fair value, (see Note 3), which was initially $0.1 million, and was included in the issuance costs of the 2018 Notes. On November 5, 2018, in connection with the extinguishment of the 2018 Notes into shares of Series B Preferred Stock, the Company issued the 2018 Notes Warrants, which were equity-classified warrants upon issuance, to purchase 76,847 shares of common stock, valued at $0.3 million. The 2018 Notes Warrants vested immediately upon issuance and have an exercise price of $6.59 per share and expire on November 4, 2028.

On February 24, 2020, a warrantholder exercised 386 warrants in a cashless exercise at net, and the Company issued 333 shares of common stock. On June 24, 2020, a warrantholder exercised 20,331 warrants in a cashless exercise at net, and the Company issued 17,369 shares of common stock.

Warrants Issued with Series B Preferred Stock

In November and December 2018, in connection with the sale and issuance of the Series B Preferred Stock, the Company was obligated to issue equity-classified warrants to purchase 72,261 shares of common stock (collectively the “2018 Warrants”), valued in the aggregate at $0.2 million, which was included in the issuance costs for the Series B Preferred Stock. The warrants vest immediately upon issuance, have an exercise price of $8.24 per share and expire 10 years from the date of issuance.

The fair value of the 2018 Warrants was estimated using the Black-Scholes option pricing model with the following assumptions:

Contractual term (in years)

    

10.0

 

Volatility

 

73.22

%

Risk-free interest rate

 

2.70

%

Dividend yield

 

0.00

%

In February 2019, in connection with the sale and issuance of the Series B Preferred Stock, the Company was obligated to issue warrants to purchase 23,867 shares of common stock (collectively the “2019 Warrants”), valued in the aggregate at $0.1 million, which was included in the issuance costs for the Series B Preferred Stock. The warrants vested immediately upon issuance, have an exercise price of $8.24 per share and expire 10 years from the date of issuance.

The fair value of the 2019 Warrants was estimated using the Black-Scholes option pricing model with the following assumptions:

Contractual term (in years)

    

10.0

 

Volatility

 

73.22

%

Risk-free interest rate

 

2.70

%

Dividend yield

 

0.00

%

The inputs utilized by management to value the warrants are highly subjective. The assumptions used in calculating the fair value of the warrants represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the fair value of the warrants may be materially different in the future.

On January 14, 2020, a warrantholder exercised 220 warrants in a cashless exercise at net, and the Company issued 146 shares of common stock. On February 24, 2020, a warrantholder exercised 5,193 warrants in a cashless

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exercise at net, and the Company issued 4,313 shares of common stock. On June 24, 2020, a warrantholder exercised 24,309 warrants in a cashless exercise at net, and the Company issued 19,882 shares of common stock.

A summary of the Company’s outstanding common stock warrants as of March 31, 2021 is as follows:

Warrants

Outstanding as of December 31, 2020

153,473

Warrants granted and issued

 

Warrants exercised

 

(27,855)

Warrants exchanged

 

Balance as of March 31, 2021

125,618

10. LEASES

The following table summarizes the Company’s lease related costs for the three months ended March 31, 2021 and 2020:

Operating
(in thousands)

Lease Cost

Statement of Operations Location

2021

2020

Operating Lease Cost

General and administrative

$

126

$

121

Total Lease Cost

$

126

$

121

Average lease terms and discount rates for the Company’s operating leases were as follows:

Three Months Ended

Three Months Ended

March 31, 

March 31, 

Other Information

    

2021

2020

Weighted-average remaining lease term

Operating leases

3.56 years

4.59 years

Weighted-average discount rate

Operating leases

5.69%

5.69%

The following table summarizes the maturities of lease liabilities as of March 31, 2021:

    

Operating

Year

(in thousands)

2021

$

371

2022

507

2023

515

2024

424

Thereafter

Total lease payments

1,817

Less: interest

178

Total lease liabilities

$

1,639

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11. INCOME TAXES

On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provide certain relief as a result of the Covid-19 pandemic. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of social security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property and the creation of certain refundable employee retention credits. The CARES Act did not have a material impact on our financial statements for the three months ended March 31, 2021. The Company continues to monitor any effects that may result from the CARES Act.

During the three months ended March 31, 2021 and the year ended December 31, 2020, the Company recorded a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a profitable position in the near future.

12. BENEFIT PLANS

The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code in 2018. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Matching contributions to the plan may be made at the discretion of the Company’s board of directors. The Company made approximately $0.1 million and $25,000 in matching contributions to the plan during the three months ended March 31, 2021 and 2020, respectively.

13. NET LOSS PER COMMON SHARE

Basic net loss per common share is computed by dividing the net loss available to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

Diluted net loss per common share is computed by giving the effect of all potential shares of common stock, including stock options, preferred shares, warrants and instruments convertible into common stock, to the extent dilutive. Basic and diluted net loss per common share was the same for the three months ended March 31, 2021 and 2020, as the inclusion of all potential common shares outstanding would have been anti-dilutive.

The following table sets forth the computation of basic and diluted net loss per common share for the three months ended March 31, 2021 and 2020:

Three Months Ended

 

March 31, 

(in thousands, except for share data)

    

2021

    

2020

Numerator:

 

Net loss

$

(24,179)

$

(12,369)

Denominator:

 

Weighted-average common stock outstanding

 

24,135,735

20,840,658

Net loss per share attributable to common stockholders - basic and diluted

$

(1.00)

$

(0.59)

The Company’s potentially dilutive securities, which include restricted stock units, stock options, and warrants, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding for the three months ended March 31, 2021 and 2020, from the

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computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:

As of

March 31, 

    

2021

    

2020

Options to purchase common stock

 

4,491,670

4,238,892

Restricted stock units

204,279

Warrants to purchase common stock

 

125,618

198,113

14. RELATED PARTIES

In December 2018, the Company entered into an agreement (the “LaunchLabs Agreement”) with ARE-LaunchLabs NYC LLC (“Alexandria LaunchLabs”), a subsidiary of Alexandria Real Estate Equities, Inc. for use of specified premises within the Alexandria LaunchLabs space on a month-to-month basis. A member of the Company’s board of directors is the founder and executive chairman of Alexandria Real Estate Equities, Inc. During the three months ended March 31, 2021 and 2020, the Company made payments to Alexandria LaunchLabs of approximately $23,000 and $24,000, respectively, under the LaunchLabs Agreement, which was recognized in research and development expenses. As of March 31, 2021, there were no amounts due to Alexandria LaunchLabs under the LaunchLabs Agreement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in the Annual Report. In addition, this discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under “Special Note Regarding Forward-Looking Statements” and under “Item 1A. Risk Factors” in this report, and in other reports we file with the SEC, 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.

Overview

We are a clinical-stage biopharmaceutical company developing a pipeline of novel product candidates against validated molecular targets in indications of high unmet medical need. We focus on molecules and pathways whose role in the disease process is well known based on prior research, but have previously failed to yield successful products due to poor efficacy and tolerability. Our unique approach to drug development leverages recent technological advances to design improved drugs, employs early use of biomarkers to confirm biological activity and focuses on abbreviated regulatory pathways. Our first molecular target is aldose reductase, or AR, an enzyme that converts glucose to sorbitol under oxidative stress conditions, and is implicated in multiple diseases. Prior attempts to inhibit this enzyme were hindered by nonselective, nonspecific inhibition, which resulted in limited efficacy and significant off-target safety effects. The detrimental consequences of AR activation have been well established by decades of prior research. Our AR program currently includes three small molecules, which are all potent and selective inhibitors of AR, but are engineered to have unique tissue permeability profiles to target different disease states, including diabetic complications, heart disease and rare metabolic diseases. Using similar strategies to our ARI program, we have also developed a program targeting selective inhibition of phosphatidylinositol 3-kinase, or PI3K, subunits, which has produced an early-stage oncology pipeline. The result of this unique multifaceted approach to drug development is a portfolio of highly specific and selective product candidates that we believe are significantly de-risked and can move quickly through the development process.

AT-007 is a novel central nervous system, or CNS, penetrant ARI that we are developing for the treatment of rare metabolic diseases, including galactosemia, a devastating rare pediatric metabolic disease that affects how the body processes a simple sugar called galactose, and for which there is no known cure or approved treatment available. The U.S. Food and Drug Administration, or FDA, has granted both orphan drug designation and rare pediatric disease designation to AT-007 for the treatment of galactosemia. We have completed an adult study in healthy volunteers and galactosemia patients, demonstrating that AT-007 is safe and well tolerated, and significantly reduces plasma galactitol levels vs. placebo. Galactitol is a toxic metabolite of galactose, which is formed in galactosemia patients by aberrant activity of aldose reductase when galactose is present at high levels. A pediatric study is underway in children with galactosemia, assessing the impact of AT-007 vs. placebo on safety, biomarker reduction of galactitol, and long-term functional outcomes. On April 13, 2021, we presented data featuring a cross-sectional analysis of nineteen pediatric patients with Classic Galactosemia, providing meaningful insight on the progressive worsening of the central nervous system phenotype with age.

AT-007 is also being studied in a rare disease caused by Sorbitol Dehydrogenase deficiency, called SORD deficiency. Aldose Reductase is the first enzyme in the polyol pathway, converting glucose to sorbitol. AR is then followed by Sorbitol Dehydrogenase, which converts sorbitol to fructose. Patients with SORD deficiency accumulate very high levels of sorbitol in their cells and tissues as a result of the enzyme deficiency, which results in tissue toxicities such as peripheral neuropathy and motor neuron disease. Recent research in drosophila and cell models of SORD deficiency demonstrates that treatment with an ARI that blocks sorbitol production may provide benefit in this disease. Preclinical studies on AT-007 have demonstrated significant reduction in sorbitol levels in fibroblasts from SORD deficient patients. In March 2021, we initiated a Phase 2 pilot study in SORD deficiency. We are in the process of discussing regulatory requirements for approval in SORD deficiency and plan to advance AT-007 towards registration for this indication.

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We also plan to initiate a clinical development program on AT-007 in another pediatric rare disease, called PMM2-CDG in 2021. PMM2-CDG is a glycosylation disorder caused by deficiencies in the enzyme phosphomannomutase 2, which leads to CNS symptoms similar to galactosemia, including low IQ, tremor, and speech and motor problems. Aldose Reductase is over-activated in this disease as a compensatory consequence of PMM2 deficiency, and a CNS penetrant ARI may be a compelling clinical option. Initial data in fibroblast cell lines derived from PMM2-CDG patients demonstrates that AT-007 treatment increases phosphomannomutase 2 activity. The FDA has granted pediatric rare disease designation and orphan designation for AT-007 in PMM2-CDG. Design of the pediatric PMM2-CDG clinical trial is underway, and we expect to initiate a clinical trial in 2021 and advance clinical development for this indication.

AT-001 is a novel ARI with broad systemic exposure and peripheral nerve permeability that we are developing for the treatment of diabetic cardiomyopathy, or DbCM, a fatal fibrosis of the heart, for which no treatments are available. We completed a Phase 1/2 clinical trial evaluating AT-001 in approximately 120 patients with type 2 diabetes, in which no drug-related adverse effects or tolerability issues were observed. In September 2019, we announced the initiation of a Phase 3 registrational trial of AT-001 in DbCM. The study, called ARISE-HF, is designed to evaluate AT-001’s ability to improve or prevent the decline of functional capacity in patients with DbCM at high risk of progression to overt heart failure. Although we did experience enrollment delays in 2020 associated with the Covid-19 pandemic, modifications were made to the trial to include additional sites and geographies to address Covid-19-related issues. We expect the study to be fully enrolled in 2021.

AT-003 is a novel ARI designed to cross through the back of the eye when dosed orally, and has demonstrated strong retinal penetrance, for the treatment of diabetic retinopathy, or DR. DR is an ophthalmic disease that occurs in diabetic patients and for which treatments are currently limited to high-cost biologics requiring intravitreal administration. DR has been linked to AR activity, including elevations in sorbitol and subsequent changes in retinal blood vessels, which distorts vision and leads to permanent blindness. We are currently in late stages of preclinical development and intend to advance AT-003 into a Phase 1 clinical trial in 2021.

AT-104 is a dual selective PI3K inhibitor in preclinical development for T Cell Acute Lymphoblastic Leukemia (T-ALL). AT-104 has demonstrated significant benefit in both in vitro and in vivo models of T-ALL. In September 2020 we received pediatric rare disease designation for AT-104 in T-ALL.

As we advance our product candidates forward in additional indications, such as SORD deficiency, PMM2-CDG and retinopathy, we anticipate potential moderate growth in our clinical development and operations teams to support the additional clinical trials, as well as addition of a medical affairs team to support the late stage indications and preparations for commercialization.

We are in the process of building out our commercial infrastructure and expect commercial expenditures to continue as we prepare for potential galactosemia commercial launch, including additional costs related to marketing, market access, market research and sales and forecasting, as well as an increase in compensation expense related to several new hires in connection with the build-out.

Since inception in 2016, our operations have focused on developing our product candidates, organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting clinical trials. We do not have any product candidates approved for sale and have not generated any revenue.

We have incurred significant operating losses since inception in 2016. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of one or more of our product candidates. Our net loss was $94.0 million and $24.2 million for the year ended December 31, 2020 and the three months ended March 31, 2021, respectively. As of March 31, 2021, we had an accumulated deficit of $184.9 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future in connection with our ongoing activities. Furthermore, we expect to incur additional costs associated with operating as a public company that we did not previously incur or had previously incurred at lower rates as a private company, including significant legal, accounting, investor relations and other expenses. As of March 31, 2021, we had cash and cash equivalents and short-term investments of $148.1 million.

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February 2021 Secondary Public Offering

In February 2021, we issued and sold 3,000,000 shares of common stock at a public offering price of $23.00 per share, with an additional 450,000 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares in the February Offering. We received aggregate net proceeds, net of underwriting discounts and commissions and offering costs of $74.4 million.

Components of Our Results of Operations

Revenue

Since inception, we have not generated any revenue and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for our product candidates are successful and result in regulatory approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements.

Operating Expenses

Research and Development Expenses

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

employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research and development functions;
fees paid to consultants for services directly related to our product development and regulatory efforts;
expenses incurred under agreements with contract research organizations, or CROs, as well as contract manufacturing organizations, or CMOs, and consultants that conduct and provide supplies for our preclinical studies and clinical trials;
costs associated with preclinical activities and development activities;
costs associated with our technology and our intellectual property portfolio; and
costs related to compliance with regulatory requirements.

We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.

Research and development costs also include costs incurred in connection with certain licensing arrangements. Before a compound receives regulatory approval, we record upfront and milestone payments made by us to third parties under licensing arrangements as expense. Upfront payments are recorded when incurred, and milestone payments are recorded when the specific milestone has been achieved. Once a compound receives regulatory approval, we will record any milestone payments in Identifiable intangible assets, less accumulated amortization and, unless the asset is determined to have an indefinite life, we amortize the payments on a straight-line basis over the remaining agreement term or the expected product life cycle, whichever is shorter.

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Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase for the foreseeable future as we continue clinical development for our product candidates and continue to discover and develop additional product candidates. If any of our product candidates enter into later stages of clinical development, they will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Historically, we have incurred research and development expenses that primarily relate to the development of AT-007, AT-001 and our ARI program. As we advance our product candidates, we expect to allocate our direct external research and development costs across each of the indications or product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, and commercial functions. General and administrative expenses also include professional fees for legal, accounting, auditing, tax and consulting services; travel expenses; and facility-related expenses, which include allocated expenses for rent and maintenance of facilities and other operating costs.

Commercial expenses consist of payroll expense for commercial personnel, as well as marketing, market research, market access, and other focused investments to support launch of drug candidates and generate evidence of commercial potential and value proposition. Commercial expenses are included in general and administrative expenses.

We expect that our general and administrative expenses will increase in the future as we increase our general and administrative headcount to support our continued research and development and potential commercialization of our product candidates. We also expect to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax compliance services; director and officer insurance costs; and investor and public relations costs.

Other Income (Expense), Net

Other income (expense), net consists of interest income (expense), net, and other income (expense), net. Interest income (expense), net consists primarily of our interest income on our cash and cash equivalents and marketable securities. Other income (expense), net consists primarily of realized gains and losses on sales of marketable securities.

Results of Operations

Three Months Ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020:

(Unaudited)

Three Months Ended

 

March 31, 

(in thousands)

2021

    

2020

Operating expenses:

  

 

  

Research and development

$

14,448

$

7,271

General and administrative

 

9,751

5,196

Total operating expenses

 

24,199

12,467

Loss from operations

 

(24,199)

(12,467)

Other income (expense), net:

 

Interest income (expense), net

76

122

Other income (expense)

(56)

(24)

Other income (expense), net

20

98

Net loss

$

(24,179)

$

(12,369)

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Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended March 31, 2021 and 2020:

Three Months Ended

 

March 31, 

(in thousands)

2021

    

2020

    

Increase

Clinical and pre-clinical

$

6,454

$

5,162

$

1,292

Drug manufacturing and formulation

 

5,820

616

 

5,204

Personnel expenses

 

1,092

782

 

310

Stock-based compensation

799

642

157

Regulatory and other

 

283

69

 

214

Total research and development expenses

$

14,448

$

7,271

$

7,177

Research and development expenses for the three months ended March 31, 2021 were $14.4 million, compared to $7.3 million for the three months ended March 31, 2020. For the three months ended March 31, 2021, the increase of $7.2 million was primarily related to:

an increase in clinical and pre-clinical expense of $1.3 million, primarily related to the progression of the AT-007 ACTION-Galactosemia adult extension study, the AT-007 ACTION-Galactosemia Kids pediatric registrational study and the AT-001 Phase 3 ARISE-HF clinical study;
an increase in drug manufacturing and formulation costs of $5.2 million primarily related to the progression of the manufacturing campaigns and the completion and release of AT-001 and AT-007 drug product batches;
an increase in personnel expenses of $0.3 million due to the increase in headcount in support of our clinical program pipeline;
an increase in stock-based compensation of $0.2 million due to new stock option and restricted stock unit grants; and
an increase in regulatory and other expenses of $0.2 million relating to an increase in clinical consulting fees during the three months ended March 31, 2021.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended March 31, 2021 and 2020:

Three Months Ended

 

March 31, 

(in thousands)

    

2021

    

2020

    

Increase

Legal and professional fees

$

1,771

$

2,182

$

(411)

Commercial Expenses

1,932

1,932

Personnel expenses

 

1,544

610

 

934

Stock-based Compensation

2,182

689

1,493

Insurance Expenses

1,010

784

226

Other expenses

 

1,312

931

 

381

Total general and administrative expenses

$

9,751

$

5,196

$

4,555

General and administrative expenses were $9.8 million for the three months ended March 31, 2021, compared to $5.2 million for the three months ended March 31, 2020. For the three months ended March 31, 2021, the increase of $4.6 million was primarily related to:

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an increase of $1.9 million related to the establishment of a commercial department;
an increase in stock-based compensation of $1.5 million and increase in personnel expenses of $0.9 million related to an increase in headcount;
an increase of $0.2 million related to increased insurance costs;
an increase of $0.4 million in other expenses relating to increased costs of rent and other office expenses; and
a $0.4 million decrease in legal and professional fees due to lower external legal fees.

Interest Income (Expense), Net

Interest income was $76,000 for the three months ended March 31, 2021, as compared to $0.1 million for the three months ended March 31, 2020. The change was primarily related to interest income from our marketable securities of $76,000 for the three months ended March 31, 2021, compared to $0.1 million for the three months ended March 31, 2020.

Other Income (Expense)

Other expense was $56,000 for the three months ended March 31, 2021, compared to $24,000 for the three months ended March 31, 2020. The change was primarily related to the realized loss of $56,000 related to the sale and or maturities of marketable securities during 2021. During the three months ended March 31, 2020, there was a realized loss of $25,000 related to loss on foreign exchange transactions.

Liquidity and Capital Resources

Since our inception through March 31, 2021, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations. We expect our existing cash and cash equivalents and short-term investments of $148.1 million as of March 31, 2021 will be sufficient to fund our operating expenses and capital expenditure requirements for at least 12 months from the date of this Quarterly Report on Form 10-Q.

Cash Flows

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

Three Months Ended

 

March 31, 

(in thousands)

    

2021

    

2020

Net cash used in operating activities

$

(22,213)

$

(18,855)

Net cash used in investing activities

 

(24,672)

(41,711)

Net cash provided by financing activities

 

73,486

134,219

Net increase (decrease) in cash and cash equivalents

$

26,601

$

73,653

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2021, was $22.2 million. For the three months ended March 31, 2021, the increase was primarily due to our net losses of $24.2 million, a decrease in accrued expenses of $3.3 million, an increase in prepaid expenses of $1.6 million, and a decrease in operating lease liability of $0.1 million. This is partially offset by an increase of $2.8 million in accounts payable, $3.0 million in non-cash stock-based compensation expense, $1.0 million of amortization of insurance premium, and $0.1 million in amortization of operating lease right-of-use assets.

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Net cash used in operating activities for the three months ended March 31, 2020, was $18.9 million, primarily due to our net losses of $12.4 million from clinical and pre-clinical expenses.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2021 was $24.7 million relating to our purchase of available-for-sale securities for $88.0 million, offset by the proceeds from the sale and maturities of available-for-sale securities of $0.5 million and $62.8 million, respectively.

Net cash used in investing activities for the three months ended March 31, 2020 was $41.7 million relating to our purchase of available-for-sale securities for $41.7 million.

Financing Activities

During the three months ended March 31, 2021, net cash provided by financing activities was $73.5 million, primarily from the cash proceeds from the February Offering of $74.4 million, $67,000 from the exercise of stock options for common stock under the 2019 Plan, and $69,000 from the exercise of warrants for common stock. This was partially offset by the payment of short-term borrowings of $1.1 million.

In June 2020, we entered into the Equity Distribution Agreement with Goldman to sell shares of our common stock, from time to time, having an aggregate offering price of up to $100 million. As of March 31, 2021, we had received no proceeds from the sale of shares of common stock pursuant to the Equity Distribution Agreement.

During the three months ended March 31, 2020, net cash provided by financing activities was $134.2 million, primarily from the cash proceeds from the secondary offering of $134.1 million and $0.1 million from the exercise of stock options for common stock under the Equity Incentive Plan.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. We expect that our expenses will increase significantly if and as we:

continue the ongoing and planned development of our product candidates;
initiate, conduct and complete any ongoing, anticipated or future preclinical studies and clinical trials for our current and future product candidates;
seek marketing approvals for any product candidates that successfully complete clinical trials;
establish a sales, marketing, manufacturing and distribution infrastructure to commercialize any current or future product candidate for which we may obtain marketing approval;
seek to discover and develop additional product candidates;
continue to build a portfolio of product candidates through the acquisition or in-license of drugs, product candidates or technologies;
maintain, protect and expand our intellectual property portfolio;
hire additional clinical, regulatory and scientific personnel; and

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add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.

Furthermore, we have and 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.

Due to the numerous risks and uncertainties associated with the development of our product candidates and programs, and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future funding requirements, both near and long-term, will depend on many factors, including:

the initiation, scope, progress, timing, costs and results of our ongoing and planned clinical trials for our product candidates;
the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
the cost of defending potential intellectual property disputes, including patent infringement actions;
the achievement of milestones or occurrence of other developments that trigger payments under the Columbia Agreements, the 2020 Miami License Agreement, the 2020 Miami Research Agreement, the 2020 Miami Option Agreement, or other agreements we may enter into;
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under future collaboration agreements, if any;
the effect of competing technological and market developments;
the cost and timing of completion of clinical or commercial-scale manufacturing activities;
the costs of operating as a public company;
the extent to which we in-license or acquire other products and technologies;
our ability to establish and maintain collaborations on favorable terms, if at all;
the cost of establishing sales, marketing and distribution capabilities for our product candidates in regions where we choose to commercialize our product candidates, if approved; and
the initiation, progress, timing and results of the commercialization our product candidates, if approved, for commercial sale.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.

Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through offerings of securities, private equity financing, debt financings, collaborations or other strategic transactions. The terms of financing may adversely affect the holdings or the rights of our stockholders.

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Funding may not be available to us on acceptable terms, or at all. If we are unable to obtain funding, we may be required to delay, limit, reduce or terminate some or all of our research and product development, product portfolio expansion or future commercialization efforts. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of March 31, 2021:

Payments Due By Period