UNITY BIOTECHNOLOGY, INC. You should read the following management's discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year endedDecember 31, 2021 . Unless otherwise indicated, all information in this Quarterly Report on Form 10-Q gives effect to a 1-for-10 reverse stock split of our common stock that became effective onOctober 19, 2022 , and all references to shares of common stock outstanding and per share amounts give effect to the reverse stock split.
Overview
We are a biotechnology company engaged in researching and developing therapeutics to slow, halt, or reverse diseases of aging. Our initial focus is on creating senolytic medicines to selectively eliminate senescent cells and thereby treat diseases of aging, such as ophthalmologic diseases. InJuly 2020 , we filed an Investigational New Drug application, or IND, to commence a Phase 1, first-in-human, open-label, single-ascending dose study of UBX1325 in patients with advanced diabetic macular edema, or DME, and neovascular age-related macular degeneration, or nAMD. UBX1325 is a potent small molecule inhibitor of the anti-apoptotic Bcl-2 family member, Bcl-xL, a member of the Bcl-2 family of apoptosis-regulatory proteins. Our goal with UBX1325 is to transformationally improve real-world outcomes for patients with DME, nAMD, and diabetic retinopathy, or DR. InOctober 2020 , the Phase 1, first-in-human, clinical study of UBX1325 commenced. That study, an open-label, single ascending dose clinical trial, evaluated doses from 0.5 - 10 µg administered as a single intra-vitreal injection in up to 8 patients with DME and 11 patients with nAMD all of whom had been off all anti-VEGF treatment due to lack of benefit for at least 6 months. The results of this study demonstrated acceptable safety and tolerability without any dose-limiting toxicities; no evidence of intraocular inflammation; and mean improvement in BCVA of up to 9.5 ETDRS letters in those patients with DME receiving higher doses (5 and 10 µg) and a mean improvement in BCVA of 3.2 ETDRS letters in evaluable patients with nAMD at all doses, both at 24 weeks after treatment with UBX1325. InMay 2021 , we initiated our Phase 2 proof-of-concept study to evaluate the safety, efficacy, and durability of a single intravitreal injection of UBX1325 in a broader population of patients with DME (the BEHOLD study) and dosed our first patient inJune 2021 . A total of 65 patients were enrolled, randomized evenly between UBX1325 and sham-injected patients. These patients were actively being treated with anti-VEGF (mean of 4.03 injections in the 6 months preceding randomization), had persistent visual acuity deficits (73 ETDRS letters or worse, approximately 20/40 or worse), and residual retinal fluid (?300 µm of central subfield thickness on optical coherence tomography). Endpoints being explored in the study include safety and tolerability, changes in BCVA, CST, SRF/IRF, proportion of patients requiring rescue treatment, and durability of effects. OnAugust 12, 2022 , we announced positive 12- and 18-week data in our Phase 2 BEHOLD study of UBX1325 in patients with DME, including that a single injection of UBX1325 led to a progressive, statistically significant, and clinically meaningful improvement in mean best-corrected visual acuity compared to sham treatment. The proof-of-concept Phase 2 BEHOLD study is a multi-center, randomized, double-masked, sham- controlled study designed to evaluate the safety, tolerability, efficacy and durability of a single 10 µg dose of UBX1325 in patients with DME evaluated though 24 weeks. Patients have the option of rolling over to a 48-week long term extension and a majority of patients who have completed their 24-week visited have opted to remain in the study. In the BEHOLD study, at Week 18, the mean change from baseline of BCVA for UBX1325-treated subjects was an increase of 6.1 ETDRS letters that represents a difference of +5.0 ETDRS letters compared to sham-treated subjects (p=0.0368). In addition, patients treated with UBX1325 maintained central subfield thickness (CST) (+3.2 microns) compared to sham-treated patients who had progressive worsening (increase) in CST through 18 weeks (+53.5 microns) (p=0.0719). OnNovember 1, 2022 , we announced positive 24-week data in our BEHOLD study, showing that a single injection of UBX1325 led to a statistically significant and clinically meaningful improvement in BCVA of 7.6 ETDRS letters compared to sham treatment (p=0.0084). Inclusive of rescue data, patients treated with UBX1325 had a mean improvement in BCVA of 5.2 ETDRS letters compared to sham (p=0.0068). Patients treated with UBX1325 had a mean change in CST of -5.4 microns from baseline compared to a worsening (increase) of +34.6 microns in 24 -------------------------------------------------------------------------------- sham-treated patients (p=0.1244). The proportion of rescue-free patients at 24 weeks was greater on UBX1325 (59.4%) as compared to sham (37.5%) with fewer total rescues and longer time-to-rescue in UBX1325-treated patients as compared to sham. UBX1325 demonstrated a favorable safety and tolerability profile with no cases of intraocular inflammation, retinal artery occlusion, endophthalmitis, or vasculitis. Patients will continue to be followed through 48 weeks post-treatment in a long-term follow-up, with data expected in the second quarter of 2023. InMarch 2022 , we enrolled our first patient in our Phase 2 proof-of-concept study in nAMD (the ENVISION study). As ofSeptember 2022 , the study has completed enrollment of patients with nAMD who have had at least three intravitreal injections of anti-VEGF therapy in the preceding six months and who have residual sub- or intra-retinal fluid. Patients will have received their last anti-VEGF treatment approximately 4-8 weeks prior to screening, and all patients will be followed for approximately 24 weeks after dosing with either UBX1325 or aflibercept. We expect to announce 16-week data from this Phase 2 proof-of-concept study in nAMD in the first quarter of 2023, and 24-week data in the second quarter of 2023. In addition, we amended the Phase 2 ENVISION study including a Part B portion of the study to explore the benefit of a second cycle of two doses of UBX1325 treatment 4 weeks apart, administered at 24 weeks and the potential benefit of combination treatment with anti-VEGF therapy at Weeks 24 and 28 with all patients followed through Week 48. Data from Part B of the 48-week extension study is expected in the fourth quarter of 2023. InFebruary 2022 , we announced a restructuring to align resources to focus on our ongoing clinical programs and deliver on key development milestones. These actions to prioritize our ophthalmology programs and implement cost saving measures were designed to enable us to achieve multiple key clinical data readouts for UBX1325 as well as support the Tie2 and Tie2/VEGF bispecific program through advanced candidate nomination, with all other pipeline programs paused to focus resources on these advanced programs. Since the commencement of our operations, we have invested a significant portion of our efforts and financial resources in research and development activities, and we have incurred net losses each year since inception. Our net losses were$13.7 million and$16.5 million for the three months endedSeptember 30, 2022 and 2021, respectively, and$45.8 million and$50.0 million for the nine months endedSeptember 30, 2022 and 2021, respectively. We do not have any products approved for sale, and we have never generated any product revenue. As ofSeptember 30, 2022 , we had an accumulated deficit of$445.8 million , and we do not expect positive cash flows from operations in the foreseeable future. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. Based on our current operating plans, we expect our existing capital resources will fund our planned operating expenses into the first quarter of 2024, which is expected to fund key clinical data readouts for UBX1325. As a result, we will need to raise additional capital. Adequate funding may not be available to us on acceptable terms, or at all, particularly in light of the current economic uncertainty and the potential for local and/or global economic recession. We expect to continue to look for opportunities to secure such financing in the near future, in addition to using our existing 2022 ATM Offering Programs (as defined below). If sufficient funds on acceptable terms are not available when needed, we could be required to significantly reduce our operating expenses and delay, reduce the scope of, or eliminate one or more of our development programs. We expect to continue to incur net operating losses for at least the next several years as we continue our research and development efforts, advance our drug candidates through preclinical and clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization. We do not expect to generate revenue from any drug candidates that we develop until we obtain regulatory approval for one or more of such drug candidates and commercialize our products or enter into collaborative agreements with third parties. We rely on third parties in the conduct of our preclinical studies and clinical trials and for manufacturing and supply of our drug candidates. We have no internal manufacturing capabilities, and we will continue to rely on third parties, many of whom are single-source suppliers, for our preclinical and clinical trial materials, as well as the commercial supply of our products. In addition, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, we will incur significant expenses to develop a marketing and sales organization and commercial infrastructure in advance of generating any product sales. 25 --------------------------------------------------------------------------------
COVID-19 Update
The COVID-19 pandemic has placed strains on the providers of healthcare services, including the healthcare institutions, clinical research organizations, or CROs, and Institutional Review Boards under whose auspices we conduct our clinical trials. These strains have resulted in limits on the initiation of new clinical trials, slowing or halting enrollment in existing trials and restrictions placed upon on-site monitoring activities of clinical trials. Prior to the initiation of our Phase 1 and Phase 2 studies of UBX1325, we amended the clinical study protocols to enable remote data collection for clinical sites that were limited in their ability to conduct study visits in person, for either site or patient safety reasons. We also instituted remote data source verification procedures to limit the extent that on-site monitoring was required. Although we rely on third party manufacturers to supply UBX1325, there have been no disruptions in our supply chain of drug manufacturers necessary to conduct our Phase 1 and Phase 2 studies of UBX1325, and we believe we have sufficient supply of drug inventories to complete our current studies in ophthalmologic disease.
Components of Our Results of Operations
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of our drug candidates, which include:
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personnel-related expenses, including salaries, benefits, severance, and stock-based compensation for personnel contributing to research and development activities;
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laboratory expenses including supplies and services;
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clinical trial expenses;
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expenses incurred under agreements with third-party contract manufacturing organizations, contract research organizations, research and development service providers, academic research institutions, and consultants;
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expenses related to license and sponsored research agreements; and
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facilities and other allocated expenses, including expenses for rent and facilities maintenance, and depreciation and amortization.
We expect our research and development expenses to increase as we advance our drug candidates into and through preclinical and clinical trials and pursue regulatory approval of our drug candidates. The process of conducting the clinical trials required to obtain regulatory approval is costly and time-consuming. Clinical trials generally become larger and more costly to conduct as they advance into later stages and we are required to make estimates for expense accruals related to clinical trial expenses. The actual probability of success for our drug candidates may be affected by a variety of factors including: the safety and efficacy of our drug candidates, early clinical data, investment in our clinical program, the ability of collaborators, if any, to successfully develop any drug candidates we license to them, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our drug candidates. Program costs that are direct external expenses are tracked on a program-by-program basis once they enter clinical studies. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our drug candidates.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel costs,
allocated facilities costs and other expenses for outside professional services,
including legal, audit and accounting services, and depreciation and
amortization expense related to property and equipment. Personnel costs consist
of salaries, benefits, severance, and stock-based compensation. We expect to
continue to incur additional expenses associated with operating as a public
company, including expenses related to compliance with the rules and regulations
of the Securities and Exchange
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--------------------------------------------------------------------------------Commission and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities, and other administrative and professional services.
Interest Income
Interest income is primarily related to interest earned on our marketable securities.
Interest Expense
Interest expense relates to interest on the Loan Agreement entered into on
Other Income (Expense), Net
Other income during the nine months endedSeptember 30, 2022 includes the recognized gains resulting from the extinguishment of the derivative related to long term debt. Other expense during the nine months endedSeptember 30, 2021 includes the recognized gains and losses resulting from the sale of the investment and taxes.
Results of Operations
Comparison of the Three and Nine Months Ended
The following table sets forth the significant components of our results of operations (in thousands):
Three Months Ended Nine Months Ended September
September 30, 30,
2022 2021 Change 2022 2021 Change
Summary of Operations Data:
Licensing revenue - related party $ - $ - $ - $ 236 $ - $ 236
Operating expenses:
Research and development 8,208 9,081 (873 ) 28,222 28,815 (593 )
General and administrative 4,922 5,747 (825 ) 15,669 17,952 (2,283 )
Total operating expenses 13,130 14,828 (1,698 ) 43,891 46,767 (2,876 )
Loss from operations (13,130 ) (14,828 ) 1,698 (43,655 ) (46,767 ) 3,112
Interest income 329 20 309 416 82 334
Interest expense (866 ) (792 ) (74 ) (2,568 ) (2,351 ) (217 ) Other income (expense), net
(41 ) (850 ) 809 49 (996 ) 1,045
Net loss $ (13,708 ) $ (16,450 ) $ 2,742 $ (45,758 ) $ (50,032 ) $ 4,274
Research and Development
Research and development expenses decreased by $0.9 million to $8.2 million for
the three months ended September 30, 2022 from $9.1 million for the three months
ended September 30, 2021 . The decrease was primarily due to decreases of $1.7
million in personnel costs due to reduction in force, $0.5 million in laboratory
supplies and $0.9 million in facilities-related and other operating costs due to
the allocation of expenses to the Brisbane and East Grand facilities which have
been subleased, partially offset by a $2.2 million increase in direct research
and development expenses mainly due to the advancement of UBX1325 studies and in
clinical manufacturing and clinical research organizations activities during the
three months ended September 30, 2022 .
Research and development expenses decreased by $0.6 million , to $28.2 million
for the nine months ended September 30, 2022 from $28.8 million for the nine
months ended September 30, 2021 . The decrease was primarily due to decreases of
$1.0 million in personnel costs due to reduction in force, $1.4 million in
laboratory supplies and $2.5 million in facilities-related and other operating
costs due to the allocation of expenses to the Brisbane and East Grand
facilities, which have been subleased, partially offset by a net increase of
$4.3 million in direct research and development expenses mainly due to the
progress of UBX1325 studies, which was partially offset by a decrease in license
fees paid to Ascentage Pharma.
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--------------------------------------------------------------------------------General and Administrative
General and administrative expenses decreased by$0.8 million , to$4.9 million for the three months endedSeptember 30, 2022 from$5.7 million for the three months endedSeptember 30, 2021 . The decrease was primarily due to decreases of$0.6 million in personnel costs mainly due to reduction in force and$0.4 million in professional fees, partially offset by a$0.2 million increase in facilities-related and other operating costs. General and administrative expenses decreased by$2.3 million , to$15.7 million for the nine months endedSeptember 30, 2022 from$18.0 million for the nine months endedSeptember 30, 2021 . The decrease was primarily due to decreases of$1.1 million in personnel costs mainly due to lower headcount,$0.7 million in professional fees and$0.5 million in facilities-related and other operating costs. Interest Income For the three and nine months endedSeptember 30, 2022 , our interest income was$0.3 million and$0.4 million , respectively. For the three and nine months endedSeptember 30, 2021 , our interest income was insignificant. Interest income is earned from our funds invested in cash equivalents and marketable securities. The increase in interest income is due to higher investment balances and market yields. Interest Expense
Our interest expense was
Other Income (Expense), net
Other expense, net, was insignificant for the three months endedSeptember 30, 2022 and$0.9 million for the three months endedSeptember 30, 2021 . Other income, net, was insignificant for the nine months endedSeptember 30, 2022 and other expense, net, was$1.0 million for the nine months endedSeptember 30, 2021 . During the nine months endedSeptember 30, 2022 , we recognized a$0.2 million gain from extinguishment of debt upon conversion to equity and$0.1 million in net gain from the sale of assets, which was partially offset by$0.2 million in property and other taxes.
Liquidity, Capital Resources and Capital Requirements
Sources of Liquidity
We have incurred net losses each year since inception. We do not have any products approved for sale and have never generated any revenue from product sales. Historically, we have incurred operating losses as a result of ongoing efforts to develop our drug candidates, including conducting ongoing research and development, preclinical studies and providing general and administrative support for these operations. As ofSeptember 30, 2022 , we had an accumulated deficit of$445.8 million , and we do not expect positive cash flows from operations in the foreseeable future. Based on our current operating plans, we expect our existing capital resources will fund our planned operating expenses into the first quarter of 2024, which is expected to fund key clinical data readouts for UBX1325. We expect our operating losses and net cash used in operating activities will increase over at least the next several years as we continue our research and development activities, advance our drug candidates through preclinical and clinical testing and move into later and more costly stages of drug development, hire personnel and prepare for regulatory submissions and the commercialization of our drug candidates. As a result, we will need to raise additional capital to finance its operations. If we are unable to raise additional capital during the next quarter, then the above-mentioned conditions will raise substantial doubt regarding its ability to continue as a going concern. Adequate funding may not be available to us on acceptable terms, or at all, particularly in light of the economic uncertainty and potential for local and/or global economic recession, as well as the potential for the delisting of our common stock from Nasdaq. If sufficient funds on acceptable terms are not available when needed, we could be required to significantly reduce our operating expenses and delay, reduce the scope of, or eliminate one or more of our development programs. Failure to manage discretionary spending or raise additional financing, as needed, may adversely impact our ability to achieve our intended business objectives. 28 -------------------------------------------------------------------------------- We have historically financed our operations primarily through private placements of preferred stock and promissory notes, as well as public equity issuances, such as our initial public offering, and more recently through proceeds from our Loan Agreement, our prior and existing at-the-market offering programs, the Equity Purchase Agreement, and the sale of common stock and warrants in the Follow-On Offering (each as defined below) and we will continue to be dependent upon equity and/or debt financing to operate our business until we are able to generate positive cash flows from our operations. InAugust 2020 , we entered into a Loan Agreement with Hercules Capital, Inc. ("Hercules") pursuant to a term loan, subject to certain terms and conditions and$25.0 million was advanced to us on the date of execution of the Loan Agreement. InAugust 2022 , we met certain clinical and capital raising milestones, which extended the interest only period toMarch 2023 . As such, we will continue to make interest only payments throughMarch 1, 2023 and then we will be required to repay the principal balance and interest in equal monthly installments throughAugust 1, 2024 . InDecember 2021 , we entered into an amendment to our Loan and Security Agreement under the terms of which, Hercules (including any of its assignees) has the option for a period of six (6) months to convert up to$5.0 million of the outstanding principal under the existing loan into shares of our common stock. Under the Loan Amendment, the required cash reserve amount shall be reduced by the principal amount of the converted loan to not less than$10 million . As ofDecember 31, 2021 , we issued 172,736 shares of our common stock reducing our outstanding loan principal balance by$2.3 million . As ofFebruary 14, 2022 , the remaining$2.7 million of debt principal was converted to equity, and reducing the required cash reserve to$10 million . In addition, the interest only period may extend an additional three months toJune 1, 2023 should we meet specific milestones related to our clinical trials and raising additional capital. There have been no material adverse events in connection with the Loan Agreement with Hercules and the substantial doubt regarding our ability to continue as a going concern does not currently constitute a material adverse event under the terms of the Loan Agreement. InMarch 2022 , we filed a Registration Statement on Form S-3 covering the offering of up to$125.0 million of common stock, preferred stock, debt securities, warrants and units, which was declared effective by theSEC inMay 2022 . InMarch 2022 , we also entered into a sales agreement (the "March 2022 Sales Agreement") withCowen and Company, LLC ("Cowen) as sales agent to sell shares of our common stock, from time to time, with aggregate gross sales proceeds of up to$50.0 million pursuant to theMarch 2022 Shelf Registration Statement as an "at-the-market" offering under the Securities Act (the "March 2022 ATM Offering Program"). OnAugust 17, 2022 , we entered into Amendment No. 1 (the "Amendment") to theMarch 2022 Sales Agreement, which Amendment decreased the amount of our common stock that we can sell under theMarch 2022 Sales Agreement, from an aggregate offering price of up to$50.0 million to an aggregate offering price of up to$25.0 million . Cowen is entitled to 3.0% of the gross proceeds of any shares of common stock sold under theMarch 2022 Sales Agreement. During the three and nine month period endedSeptember 30, 2022 , there were 633,464 shares of the Company's common stock sold pursuant to theMarch 2022 Sales Agreement and the Company's received total net proceeds of approximately$8.6 million , after deducting commissions and other offering expenses of$0.3 million . Following the Amendment,$16.1 million of shares of common stock remained available for sale under theMarch 2022 Sales Agreement, as amended, as ofSeptember 30, 2022 . OnAugust 22, 2022 , we closed an underwritten offering (the "Follow-On Offering") in which the Company issued and sold an aggregate of 6,428,571 shares of common stock together with warrants (the "Warrants") to purchase an up to aggregate of 6,428,572 shares of common stock at an offering price of$7.00 per unit. The Warrants have an exercise price of$8.50 per share underlying the Warrant. The net proceeds to us were approximately$41.7 million . InOctober 2022 , we filed a Registration Statement on Form S-3 covering the offering of up to$250.0 million of common stock, preferred stock, debt securities, warrants and units. InOctober 2022 , we also entered into a sales agreement (the "October 2022 Sales Agreement") with Cowen as sales agent to sell shares of our common stock, from time to time, with aggregate gross sales proceeds of up to$50.0 million pursuant to theOctober 2022 Shelf Registration Statement as an "at-the-market" offering under the Securities Act (the "October 2022 ATM Offering Program", and together with theMarch 2022 ATM Offering Program, the "2022 ATM Offering Programs"). Cowen is entitled to 3.0% of the gross proceeds of any shares of common stock sold under theOctober 2022 Sales Agreement. There were no shares sold under theOctober 2022 ATM Offering Program. InSeptember 2021 , we entered into a Purchase Agreement withLincoln Park Capital Fund, LLC , under which we may at our discretion, sell up to$30.0 million shares of our common stock over a 36-month period, subject to certain daily limits, applicable prices, and conditions. During the first quarter of 2022, we had initiated the purchase of 0.1 million shares of our common stock amounting to$0.9 million in gross proceeds. There were no purchases initiated during the second and third quarters of 2022. 29 --------------------------------------------------------------------------------
Future Funding Requirements
To date we have not generated any product revenue. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our drug candidates, and begin to commercialize any approved products. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. Moreover, since becoming a public company, we continue to incur additional ongoing costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations. Until we can generate a sufficient amount of revenue from the commercialization of our drug candidates or from collaborative agreements with third parties, if ever, we expect to finance our future cash needs through various means. We do not have any committed external source of funds. Additional capital may be raised through the sale of our equity securities through our ATM programs or otherwise, incurring debt, entering into licensing or collaboration agreements with partners, receiving research contributions, grants or other sources of financing to fund our operations. There can be no assurance that sufficient funds will be available to us on attractive terms or at all. If we are unable to obtain additional funding from these or other sources, it may be necessary to significantly reduce our rate of spending through reductions in staff and delaying, scaling back, or stopping certain research and development programs. Insufficient liquidity may also require us to relinquish rights to drug candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Based on our current operating plans, we expect our existing capital resources will fund our planned operating expenses into the first quarter of 2024, which is expected to fund key clinical data readouts for UBX1325. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development, and commercialization of biotechnology products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
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the results of our ongoing clinical trials of UBX1325;
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our ability to reduce our operating expenses;
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the scope, progress, results and costs of researching and developing our drug candidates, and conducting preclinical studies and clinical studies;
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potential delays in or an increase in costs associated with our ongoing or planned preclinical studies or clinical trials as a result of the COVID-19 pandemic;
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the timing of, and the costs involved in, obtaining regulatory approvals for our current drug candidates or any future drug candidates;
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the number and characteristics of any additional drug candidates we develop or acquire;
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the timing and amount of any milestone payments we are required to make pursuant to our license agreements;
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the cost of manufacturing our current drug candidates or any future drug candidates and any products we successfully commercialize;
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the cost of commercialization activities if our current drug candidates or any future drug candidates are approved for sale, including marketing, sales and distribution costs;
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our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;
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any product liability or other lawsuits related to our products;
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the costs associated with being a public company;
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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and
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our ability to utilize our ATM Offering Programs and raise additional capital;
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whether or not we can maintain compliance with the continued listing requirements of Nasdaq; and
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the timing, receipt and amount of sales of any future approved products, if any.
Cash Flows
The following table sets forth a summary of the primary sources and uses of
cash, cash equivalents and restricted cash for each of the periods presented
below (in thousands):
Nine Months Ended September 30,
2022 2021
Cash used in operating activities $ (40,663 ) $ (40,031 )
Cash provided by (used in) investing activities (24,354 ) 30,235
Cash provided by financing activities 54,688
13,983
Net increase (decrease) in cash, cash equivalents and restricted cash$ (10,329 ) $ 4,187 Operating Activities Cash used in operating activities of$40.7 million for the nine months endedSeptember 30, 2022 consisted primarily of a net loss of$45.8 million , adjusted for net non-cash charges of$7.7 million and changes in net operating assets and liabilities of$2.6 million . Our non-cash charges consisted primarily of$7.1 million in stock-based compensation,$1.8 million in depreciation and amortization,$1.0 million amortization of debt issuance costs and$0.2 million in premium and discounts on marketable securities, partially offset by$1.9 million in non-cash rent expense,$0.3 million in gain from disposal of property and equipment, and$0.2 million in gain from extinguishment of debt upon conversion to equity. The net change in our operating assets and liabilities consisted primarily of decreases of$1.4 million in prepaid expenses and other current assets,$1.1 million in accrued compensation, and$0.6 million in accrued liabilities and other current liabilities, partially offset by an increase of$0.5 million in accounts payable. Cash used in operating activities of$40.0 million for the nine months endedSeptember 30, 2021 consisted primarily of a net loss of$50.0 million , adjusted for net non-cash charges of$12.8 million and changes in net operating assets and liabilities of$2.8 million . Our non-cash charges consisted primarily of$8.6 million in stock-based compensation,$2.2 million in depreciation and amortization,$1.5 million common stock issued to a third party,$1.4 million amortization of debt issuance costs and premium and discounts on marketable securities and$0.8 million other expenses related to the equity purchase agreement withLincoln Park Capital Fund , partially offset by$1.7 million in non-cash rent expense. The net change in our operating assets and liabilities consisted primarily of decreases of$2.0 million in accrued compensation and$0.8 million in accounts payable.
Investing Activities
Cash used in investing activities of$24.4 million for the nine months endedSeptember 30, 2022 was related to the purchases of marketable securities of$86.6 million and property and equipment of$0.1 million , partially offset by maturities of marketable securities of$62.0 million and proceeds from sale of property and equipment of$0.3 million . Cash provided by investing activities of$30.2 million for the nine months endedSeptember 30, 2021 was related to maturities of marketable securities of$88.0 million , partially offset by purchases of marketable securities of$57.6 million and property and equipment of$0.2 million . 31 --------------------------------------------------------------------------------
Financing Activities
Cash provided by financing activities of$54.7 million for the nine months endedSeptember 30, 2022 was primarily related to$12.0 million proceeds, net of issuance costs, from the sale of common stock through ourMarch 2022 ATM Offering Program and our prior at-the-market ATM offering programs,$41.7 million proceeds, net of issuance costs, from the sale of common stock and accompanying warrants in the Follow-On Offering,$0.9 million proceeds, net of issuance costs, from issuance of common stock toLincoln Park Capital Fund and$0.1 million proceeds from issuance of common stock under the 2018 ESPP. Cash provided by financing activities of$14.0 million for the nine months endedSeptember 30, 2021 was primarily related to$8.9 million proceeds, net of issuance costs, from the sale of common stock through our prior at-the-market offering programs,$2.9 million proceeds, net of issuance costs, from issuance of common stock toLincoln Park Capital Fund ,$1.8 million proceeds, net of repurchases, from issuance of common stock upon exercise of stock options,$0.2 million proceeds from issuance of common stock under the 2018 ESPP and$0.2 million proceeds from repayment of recourse notes.
Contractual Obligations and Other Commitments
Our contractual obligations and commitments relate primarily to our Loan Agreement, operating leases and non-cancelable purchase obligations under agreements with various research and development organizations and suppliers in the ordinary course of business. InFebruary 2019 , we entered into a lease agreement for new office and laboratory space inSouth San Francisco, California . See Note 6, "Commitments and Contingencies" and Note 7, "Term Loan Facility," to our condensed financial statements for further information. We are party to various license agreements pursuant to which we have in-licensed rights to various technologies, including patents, research "know-how" and proprietary research tools, for the discovery, research, development, and commercialization of drug candidates to treat diseases of aging. The license agreements obligate us to make certain milestone payments related to specified clinical development and sales milestone events, as well as tiered royalties in the low-single digits based on sales of licensed products. See Note 5, "License Revenue and Agreements," to our condensed financial statements for additional information. Indemnification In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations. In accordance with our certificate of incorporation and bylaws, we have potential indemnification obligations to our officers and directors for specified events or occurrences, subject to some limits, while they are serving at our request in such capacities. There have been no claims to date, and we have director and officer insurance that may enable us to recover a portion of any amounts paid for future potential claims.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Critical Accounting Polices and Estimates
There have been no material changes to our critical accounting policies and estimates during the nine months endedSeptember 30, 2022 as compared to those disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , other than as provided in Note 2 to our condensed financial statements, "Summary of Significant Accounting Policies." 32 --------------------------------------------------------------------------------
Recent Accounting Pronouncements
See Note 2 to our condensed financial statements, "Summary of Significant Accounting Policies," for information.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We also rely on other exemptions provided by the JOBS Act, including, without limitation, providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. We will remain an emerging growth company until the earlier of (1) the last day of the year following the fifth anniversary of the consummation of our IPO, (2) the last day of the year in which we have total annual gross revenue of at least$1.235 billion , (3) the last day of the year in which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded$700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than$1.0 billion in non-convertible debt securities during the prior three-year period. Even after we no longer qualify as an emerging growth company, we may still qualify as a "smaller reporting company" which may allow us to take advantage of many of the same exemptions from disclosure requirements including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. 33
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