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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Krystal Biotech, Inc.    KRYS

KRYSTAL BIOTECH, INC.

(KRYS)
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KRYSTAL BIOTECH : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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11/04/2019 | 08:04am EDT

The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed consolidated financial statements and related notes included elsewhere in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC, on March 12, 2019.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "expect" and the negative and plural forms of these words and similar expressions are intended to identify forward-looking statements.

Overview

We are a clinical stage gene therapy company currently dedicated to developing and commercializing novel treatments for patients suffering from skin diseases. We have developed a proprietary gene therapy platform that consists of a patented engineered viral vector based on herpes simplex virus 1 ("HSV-1") and skin-optimized gene transfer technology, to develop off-the-shelf treatments for skin diseases for which we believe there are no known effective treatments. We are initially using the platform to develop treatments for rare or orphan dermatological indications caused by the absence of or a mutation in a single gene, and plan to leverage our platform in the future to expand our pipeline to include other dermatological indications and skin conditions.

KB103 (bercolagene telserpavec "B-VEC")

Our lead clinical product candidate, B-VEC (bercolagene telserpavec) is our proprietary gene therapy candidate for the treatment of dystrophic epidermolysis bullosa, or DEB, a rare and severe genetic disease, for which there is currently no approved treatment. DEB affects the skin and mucosal tissues and is caused by one or more mutations in a gene called COL7A1, which is responsible for the production of protein type VII collagen, or COL7, which forms anchoring fibrils that bind the dermis, or inner layer of the skin, to the epidermis, or outer layer of the skin. Based on information from DEBRA International, a worldwide alliance of patient support groups for epidermolysis bullosa, or EB, of which DEB is a subset, we believe there may be as many as 52,000 cases worldwide who suffer from DEB. We estimate that there are approximately 3,500 diagnosed DEB patients in the United States. There is currently no approved cure for DEB and current treatment for DEB is limited to palliative care estimated to cost between $200,000 and $400,000 annually per patient in the United States.

In October 2019, we announced positive results from our Phase 1/2 of B-VEC that commenced in December 2018 at Stanford University. Safety data from all patients showed that B-VEC was well tolerated with no adverse events reported. The Phase 1 portion of the trial commenced in May 2018 at Stanford University, and we announced positive interim results from this clinical study on two patients in October 2018. The Phase 2 portion of the trial commenced in December 2018 at Stanford University, and we announced positive interim results from this clinical study on two patients in June 2019. In addition we enrolled two additional patients in the Phase 2 study in June 2019.

In the combined Phase 1 and Phase 2 study, 9 out of 10 wounds treated with B-VEC closed completely (100%). The average time to 100% wound closure on all B-VEC treated wounds in combined Phase 1 and Phase 2 study was 17.4 days (median 14 days). In the combined study, the average duration of wound closure on two patients following 100% wound closure as of the last follow up was 113 days (median 110 days). We are in conversations with the FDA to get alignment on GMP commercial manufacturing process and agreement on pivotal endpoints and plan to initiate our pivotal study of B-VEC shortly thereafter.

In September 2019, the Australian patent office granted the Company its first foreign patent (application number 2016401692) in Australia for its lead product candidate B-VEC. This patent covers pharmaceutical compositions comprising B-VEC, as well as medical uses such as the treatment of wounds, disorders, or diseases of the skin, particularly those found in epidermolysis bullosa patients. The Australian patent complements the Company's two existing US patents for B-VEC.

The U.S. Food and Drug Administration ("FDA") and the European Medicines Agency ("EMA") have each granted B-VEC orphan drug designation for the treatment of DEB, and the FDA has granted B-VEC fast track designation and rare pediatric designation for the treatment of DEB.


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In June 2019, the FDA granted Regenerative Medicine Advanced Therapy ("RMAT") to B-VEC for the treatment of DEB. Established under the 21st Century Cures Act, RMAT designation is a program designed to expedite the development and approval of regenerative medicine products, including gene therapy products. An investigational therapy is eligible for the RMAT designation if it is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition, and preliminary clinical evidence indicates a potential to address unmet medical needs for that disease or condition. The designation includes all the benefits of the FDA's Fast Track and Breakthrough Therapy designations and enables the ability to work more closely and frequently with the FDA to discuss surrogate or intermediate endpoints to support the potential acceleration of approval and satisfy post-approval requirements.

In March 2019, the EMA granted PRIority MEdicines, or PRIME, eligibility for B-VEC to treat DEB. The PRIME designation is awarded by the EMA to promising medicines that target an unmet medical need. These medicines are considered priority medicines by the EMA. The PRIME designation is awarded by the EMA to promising medicines that target an unmet medical need. To be eligible and accepted for PRIME, a medicine has to show its potential to benefit patients with unmet medical needs based on early clinical data coupled with non-clinical data. Through PRIME, the EMA offers enhanced support to medicine developers including early interaction and dialogue, and a pathway for accelerated evaluation by the agency. The program is intended to optimize development plans and expedite the review and approval process so that these medicines may reach patients as early as possible.

KB105

In October 2019, the U.S. Food and Drug Administration (FDA) granted Fast Track designation to KB105, the company's HSV-1 based gene therapy engineered to deliver a functional human TGM1 gene in patients with deficient autosomal recessive congenital ichthyosis (ARCI). KB105 is currently in a Phase 1/2 clinical study (GEM-3) with interim data expected in mid-2020. Fast Track Designation is granted to drugs being developed for the treatment of serious or life-threatening diseases or conditions where there is an unmet medical need. The purpose of the Fast Track Designation provision is to help facilitate development and expedite the review and potential approval of drugs to treat serious and life-threatening conditions. Sponsors of drugs that receive Fast Track Designation have the opportunity for more frequent interactions with the FDA review team throughout the development program. These can include meetings to discuss study design, data required to support approval, or other aspects of the clinical program. Additionally, products that have been granted Fast Track Designation may be eligible for priority review of a New Drug Application (NDA) and the FDA may consider reviewing portions of an NDA before the sponsor submits the complete application (Rolling Review).

In October 2019, the European Medicines Agency (EMA) Committee for Orphan Medicinal Products (COMP) granted orphan drug designation to KB105 for the treatment of transglutaminase-1 (TGM1) deficient autosomal recessive congenital ichthyosis (ARCI). Orphan designation in the EU allows Krystal Biotech to benefit from a number of key incentives, including reduced regulatory fees, protocol assistance, and market exclusivity, to develop a medicine for the treatment of a rare disease affecting not more than five in 10,000 people in the European Union. KB105 was previously granted orphan drug designation by the United States Food and Drug Administration in August 2018.

In September 2019, we initiated a Phase 1/2, first in-human trial of our second product candidate, KB105, an HSV-1 based gene therapy engineered to deliver a human transglutaminase-1 ("TGM1") gene to patients with TGM1-deficient autosomal recessive congenital ichthyosis ("ARCI"). TGM1-deficient ARCI is a debilitating rare skin disease characterized by excessive, thick scaling of the skin, causing multiple chronic health conditions. There are approximately 23,000 cases of TGM1-deficient ARCI worldwide and about 400 new cases per year globally. Our approach is to use a non-replicating, non-integrating engineered HSV-1 vector to deliver the TGM1 gene to keratinocyte skin cells, potentially allowing them to produce the TGM1 protein that is lacking in this patient population. KB105 is designed to be an off-the-shelf treatment for TGM1-deficient ARCI that can be applied topically, directly to a patient's skin. There are currently no treatments for this disease. The FDA has granted KB105 orphan drug designation and rare pediatric designation for the treatment of ARCI. We have several other product candidates in various stages of preclinical development.

Patents

In October 2019, the US Patent and Trademark Office ("USPTO") granted the Company patent number 10,441,614 covering its fully integrated vector platform, STAR-D, for skin-targeted therapeutics, as well as methods of its use for delivering any effector of interest to the skin. This new U.S. patent provides further validation of the Company's novel work in the field of rare skin diseases leveraging its HSV-1-based gene therapy technologies.


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Other

On June 27, 2019, the Company completed a public offering of 2,500,000 shares of its common stock at a price to the public of $40.00 per share. Net proceeds to the Company from the offering were $93.8 million after deducting underwriting discounts and commissions of approximately $6.0 million and other offering expenses payable by the Company of approximately $216 thousand. On July 3, 2019, the underwriters exercised their option to purchase an additional 353,946 shares of common stock at $40.00 per share for additional net proceeds of $13.3 million after deducting underwriting discounts and commissions of approximately $849 thousand. In connection with the public offering, the Company suspended its "at-the-market" equity offering program ("ATM Facility") that had previously been put in place in March 2019 which had allowed the Company to sell shares of its common stock for up to $50.0 million in gross proceeds. Following the completion of the offering, $16.8 million remains available for future sale under our registration statement, which the company could elect to sell under the ATM Facility. The remaining $33.2 million is no longer available under the ATM Facility.

At September 30, 2019, our cash, cash equivalents and short-term investments balance was approximately $203.2 million. Since operations began, we have incurred operating losses. Our net losses were $4.3 million and $13.7 million for the three and nine months ended September 30, 2019, respectively. At September 30, 2019, we had an accumulated deficit of $33.7 million. We expect to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We will need to generate significant revenue to achieve profitability, and we may never generate revenue or enough revenue to achieve profitability.

We commenced operations in April 2016. In March 2017, we converted from a California limited liability company to a Delaware C-corporation, and changed our name from Krystal Biotech, LLC to Krystal Biotech, Inc. On June 19, 2018, we incorporated Krystal Australia Pty Ltd, an Australian proprietary limited company, for the purposes of undertaking preclinical and clinical studies in Australia. On April 24, 2019, we incorporated Jeune, Inc. in Delaware, a wholly-owned subsidiary, for the purposes of undertaking preclinical studies for aesthetic skin conditions. To date, our operations have been focused on organizing and staffing our company, developing our proprietary platform, identifying potential product candidates, undertaking preclinical studies and clinical trials, and developing an in-house cGMP facility.

Costs related to clinical trials can be unpredictable and therefore there can be no guarantee that we will have sufficient capital to fund our continued clinical studies of B-VEC or KB105, planned preclinical studies for our other product candidates, or our operations. Our funds may not be sufficient to enable us to seek marketing approval to commercially launch B-VEC or KB105. Accordingly, to obtain marketing approval for and to commercialize any of our product candidates, we may be required to obtain further funding through public or private equity offerings, debt financings, collaboration and licensing arrangements. Adequate additional financing may not be available to us on acceptable terms, if at all. Our failure to raise capital when needed could have a negative effect on our financial condition and our ability to pursue our business strategy.




Financial Overview

Revenue

We currently have no approved products have not generated any revenue from the sale of products or other sources to date. In the future, we may generate revenue from product sales, royalties on product sales, license fees, milestones, or upfront payments if we enter into any collaborations or license agreements. We expect that our future revenue, if any, will fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any such payments and sales.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred to advance our preclinical and clinical candidates, which include:

    •  expenses incurred under agreements with contract manufacturing
       organizations, or CMOs, consultants and other vendors that conduct our
       preclinical activities;


    •  costs of acquiring, developing and manufacturing clinical trial materials
       and lab supplies; and


    •  facility costs, depreciation and other expenses, which include direct
       expenses for rent and maintenance of facilities and other supplies.


  • payroll related expenses, including stock-based compensation expenses




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We expense internal research and development costs to operations as incurred. We expense third party costs for research and development activities, such as the manufacturing of preclinical and clinical materials, based on an evaluation of the progress to completion of specific tasks such as manufacturing of drug substance, fill/finish and stability testing, which is provided to us by our vendors.

We expect our research and development expenses will increase as we continue the manufacture of preclinical and clinical materials and manage the clinical trials of, and seek regulatory approval for, our product candidates and expand our product portfolio. In the near term, we expect that our research and development expenses will increase as we initiate pivotal Phase 3 clinical trial for B-VEC and continue Phase 1/2 for KB105. Due to the numerous risks and uncertainties associated with product development, we cannot determine with certainty the duration, costs and timing of these clinical trials, and, as a result, the actual costs to complete these planned clinical trials may exceed the expected costs.

General and Administrative Expenses

General and administrative expenses consist principally of payroll related expenses, including stock-based compensation expenses, professional fees associated with corporate and intellectual property legal expenses, consulting, accounting services, facility-related costs and travel expenses.

We anticipate that our general and administrative expenses will increase in the future to support the continued research and development of our product candidates and to operate as a public company. These increases will likely include increased costs for insurance, costs related to the hiring of additional personnel and payments to outside consultants, lawyers and accountants, among other expenses. Additionally, if and when we believe a regulatory approval of our first product candidate appears likely, we anticipate that we will increase our salary and personnel costs and other expenses as a result of our preparation for commercial operations.

Interest Income

Interest income consists primarily of income earned from our cash, cash equivalents and short-term investments.

Critical Accounting Policies, Significant Judgments and Estimates

There have been no significant changes during the three and nine months ended September 30, 2019 to our critical accounting policies, significant judgments and estimates as disclosed in our management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2018.

Results of Operations

Three Months Ended September 30, 2019 and 2018



                                      Three Months Ended September 30,
                                         2019                  2018            Change
   (In thousands)                                (unaudited)
   Expenses
   Research and development         $         3,885       $         1,914     $  1,971
   General and administrative                 1,457                 1,058          399
   Total operating expenses                   5,342                 2,972        2,370
   Loss from operations                      (5,342 )              (2,972 )     (2,370 )
   Other Income
   Interest and other income, net             1,070                   217          853
   Net loss                         $        (4,272 )$        (2,755 )$ (1,517 )




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Research and Development Expenses

Research and development expenses increased $2.0 million in the three months ended September 30, 2019 compared to the three months ended September 30, 2018. Higher research and development expenses were due largely to increases in lab supplies of $441 thousand, outsourced research and development activities of $702 thousand, payroll related expenses of $456 thousand, and other research and development expenses of $372 thousand.

General and Administrative Expenses

General and administrative expenses increased $399 thousand in the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. Higher general and administrative spending was due largely to increases in payroll related expenses of $306 thousand and other administrative expenses of $93 thousand.

Interest and Other Income

Interest and other income for the three months ended September 30, 2019 and 2018 was $1.1 million and $217 thousand, respectively and consisted of interest income earned from our cash, cash equivalents and short-term investments.

Results of Operations

Nine months Ended September 30, 2019 and 2018



                                       Nine Months Ended September 30,
                                          2019                  2018           Change
   (In thousands)                                (unaudited)
   Expenses
   Research and development         $         11,267       $        4,959$  6,308
   General and administrative                  4,660                2,738        1,922
   Total operating expenses                   15,927                7,697        8,230
   Loss from operations                      (15,927 )             (7,697 )     (8,230 )
   Other Income
   Interest and other income, net              2,196                  516        1,680
   Net loss                         $        (13,731 )$       (7,181 )$ (6,550 )

Research and Development Expenses

Research and development expenses increased $6.3 million in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Higher research and development expenses were due largely to increases in lab supplies of $2.1 million, payroll related expenses of $1.5 million, outsourced research and development activities of $1.5 million, and other research and development expenses of $1.2 million.

General and Administrative Expenses

General and administrative expenses increased $1.9 million in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Higher general and administrative spending was due largely to increases in payroll related expenses of $1.3 million, legal and professional expenses of $164 thousand and other administrative expenses of $441 thousand.

Interest and Other Income

Interest and other income for the nine months ended September 30, 2019 and 2018 was $2.2 million and $516 thousand, respectively and primarily consisted of interest income earned from our cash, cash equivalents and short-term investments.


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Liquidity and Capital Resources

Overview

As of September 30, 2019, the Company had an accumulated deficit of $33.7 million. With the net proceeds raised upon the close of its initial public offering ("IPO") in September 2017, a private placement in August 2018, two secondary public offerings in October 2018 and June 2019, the Company believes that its cash, cash equivalents and short-term investments of approximately $203.2 million as of September 30, 2019 will be sufficient to allow the Company to fund its operations for at least 12 months from the filing date of this Form 10-Q. As the Company continues to incur losses, a transition to profitability is dependent upon the successful development, approval and commercialization of its product candidates and the achievement of a level of revenues adequate to support the Company's cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional capital. Management intends to fund future operations through the sale of equity and debt financings and may also seek additional capital through arrangements with strategic partners. There can be no assurances that additional funding will be available on terms acceptable to the Company, if at all.

Operating Capital Requirements

We expect our primary use of capital to continue to be for compensation and related expenses, manufacturing costs for preclinical and clinical materials, third party clinical trial research and development services, laboratory and related supplies, clinical costs, legal and other regulatory expenses and general overhead costs. We believe that our available funds will be sufficient to enable us to initiate our pivotal Phase 3 clinical trials for B-VEC and continue Phase 1/2 clinical trials for KB105.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical 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:

    •  the timing and costs of our anticipated pivotal Phase 3 clinical trial for
       B-VEC;


  • the progress, timing and costs of manufacturing of B-VEC for clinical trials;


  • the timing and costs of continuing Phase 1/2 clinical trials for KB105;


    •  the initiation, scope, progress, timing, costs and results of drug
       discovery, laboratory testing, manufacturing, preclinical studies and
       clinical trials for our other product candidates and potential product
       candidates;


    •  the costs of maintaining our existing in-house commercial-scale cGMP
       manufacturing facility;


    •  the costs of building a second in-house commercial-scale cGMP manufacturing
       facility;


    •  the costs associated with the manufacturing process development and
       evaluation of third-party manufacturers;


    •  the costs of commercialization activities for B-VEC and other product
       candidates once we receive marketing approval for B-VEC and other product
       candidates. Costs of commercialization includes but is not limited to the
       costs and timing of establishing product sales, medical affairs, marketing,
       distribution and manufacturing capabilities;


    •  subject to the receipt of marketing approval, revenue, if any, received
       from commercial sale of B-VEC or other product candidates;


    •  the extent to which the costs of our product candidates, if approved, will
       be paid by health maintenance, managed care, pharmacy benefit and similar
       healthcare management organizations, or will be reimbursed by government
       authorities, private health coverage insurers and other third-party payors;


    •  the amount and timing of any payments we may be required to make, or that
       we may receive, in connection with the licensing, filing, prosecution,
       defense and enforcement of any patents or other intellectual property
       rights, including milestone and royalty payments, and patent prosecution
       fees that we are obligated to pay pursuant to our license agreements;


    •  the costs of preparing, filing and prosecuting patent applications,
       maintaining and enforcing our intellectual property rights and defending
       intellectual property related claims;


    •  our current license agreements remaining in effect and our achievement of
       milestones under those agreements;


    •  the terms and timing of any future collaborations, licensing, consulting or
       other arrangements that we may establish;


    •  our ability to establish and maintain collaborations and licenses on
       favorable terms, if at all; and


    •  the extent to which we acquire or in-license other product candidates and
       technologies.


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We expect that we will need to obtain substantial additional funding in order to commercialize B-VEC or any other product candidates, including KB105. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interests of our existing stockholders may be materially diluted and the terms of these securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders. In addition, debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely affect our ability to conduct our business. If we are unable to raise capital when needed or on attractive terms, we could be forced to significantly delay, scale back or discontinue the development or commercialization of B-VEC or KB105 or our other product candidates, and may result in us seeking collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, our rights to B-VEC or KB105 or our other product candidates that we otherwise would seek to develop or commercialize ourselves.

Sources and Uses of Cash

The following table summarizes our sources and uses of cash (in thousands):



                                                        Nine Months Ended
                                                          September 30,
                                                        2019          2018
                                                          (unaudited)
          Net cash used in operating activities       $ (11,667 )$ (5,927 )
          Net cash used in investing activities          (4,423 )     (6,556 )
          Net cash provided by financing activities     107,226        9,559
          Net increase (decrease) in cash             $  91,136$ (2,924 )




Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2019 was $11.7 million and consisted primarily of a net loss of $13.7 million adjusted for non-cash items of loss on disposals of fixed assets, depreciation and stock-based compensation expense of $1.5 million, and cash provided by net decreases in operating assets and liabilities of $596 thousand.

Net cash used in operating activities for the nine months ended September 30, 2018 was $5.9 million and consisted primarily of a net loss of $7.2 million adjusted for non-cash items of depreciation and stock-based compensation expense of $570 thousand, and cash provided by net decreases in operating assets and liabilities of $684 thousand.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2019 was $4.4 million and consisted primarily of purchases of $6.9 million of short-term available-for-sale investment securities, and expenditures of $4.1 million on the build-out of our new GMP facilities and purchases of computer and laboratory equipment, partially offset by proceeds of $6.6 million received from the maturities of short-term investments.

Net cash used in investing activities for the nine months ended September 30, 2018 was $6.6 million and consisted primarily of purchases of $5.6 million of short-term available-for-sale investment securities, and purchases of $930 thousand of computer and laboratory equipment.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2019 was primarily from proceeds from a public offering in June 2019 of 2,500,000 shares of its common stock at a price to the public of $40.00 per share. Net proceeds to the Company from the offering were $93.8 million after deducting underwriting discounts and commissions of approximately $6.0 million and other offering expenses. On July 3, 2019, the underwriters exercised their option to purchase an additional 353,946 shares of common stock at $40.00 per share for additional net proceeds of $13.3 million after deducting underwriting discounts and commissions of approximately $849 thousand.




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Net cash provided by financing activities for the nine months ended September 30, 2018 was $9.6 million and was primarily from proceeds from Frazier Life Sciences through a private placement of 625,000 shares of its common stock at $16.00 per share. Net proceeds to the Company from the private placement were $9.5 million after deducting underwriting discounts and commissions of approximately $450 thousand.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Contractual Obligations

There have been no material changes to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 other than as described in Note 5 "Commitments and Contingencies" of our condensed consolidated financial statements on this Form 10-Q.

JOBS Act Accounting Election

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or 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 not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.


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