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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Ultragenyx Pharmaceutical Inc.    RARE

ULTRAGENYX PHARMACEUTICAL INC.

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ULTRAGENYX PHARMACEUTICAL : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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05/07/2019 | 06:19am EDT
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the accompanying unaudited
consolidated financial statements and related notes in Item 1 and with the
audited consolidated financial statements and the related notes included in our
Annual Report on Form 10-K for the year ended December 31, 2018 (the "Annual
Report").

Overview

We are a biopharmaceutical company focused on the identification, acquisition,
development, and commercialization of novel products for the treatment of
serious rare and ultra-rare genetic diseases. We target diseases for which the
unmet medical need is high, the biology for treatment is clear, and for which
there are no currently approved therapies. Our strategy, which is predicated
upon time- and cost-efficient drug development, allows us to pursue multiple
programs in parallel with the goal of delivering safe and effective therapies to
patients with the utmost urgency.

Approved Therapies and Clinical Product Candidates

Our current approved therapies and clinical-stage pipeline consist of three product categories: biologics, small molecules, and gene therapy product candidates.

Our biologic products include approved therapies Crysvita® (burosumab) and Mepsevii™ (vestronidase alfa):

• Crysvita is an antibody targeting fibroblast growth factor 23, or FGF23,

developed for the treatment of X-linked hypophosphatemia, or XLH, a rare,

hereditary, progressive and lifelong musculoskeletal disorder characterized

by renal phosphate wasting caused by excess FGF23 production. Crysvita is

approved in the United States, Canada, and Brazil for the treatment of XLH

in adult and pediatric patients one year of age and older. In the European

Union, or EU, Crysvita is conditionally approved for the treatment of XLH

with radiographic evidence of bone disease in children one year of age and

older and adolescents with growing skeletons. A filing to expand the label

to include adults with XLH is also planned in the EU.



We are collaborating with Kyowa Hakko Kirin, or KHK, and Kyowa Kirin
International, or Kyowa Kirin, a wholly owned subsidiary of KHK, on the
development and commercialization of Crysvita globally. A regulatory submission
to expand the label to include adults with XLH is also planned by our partner,
Kyowa Kirin, in the EU.

Crysvita is also being developed for the treatment of tumor-induced osteomalacia, or TIO. TIO results from typically benign tumors that produce excess levels of FGF23, which can lead to severe hypophosphatemia, osteomalacia, fractures, fatigue, bone and muscle pain, and muscle weakness.

• Mepsevii is an intravenous, or IV, enzyme replacement therapy, developed for

the treatment of Mucopolysaccharidosis VII, also known as MPS VII or Sly

syndrome, a rare lysosomal storage disease that often leads to multi-organ

dysfunction, pervasive skeletal disease, and death. Mepsevii is approved in

the United States for the treatment of children and adults with MPS VII. In

the EU, Mepsevii is approved under exceptional circumstances for the

treatment of non-neurological manifestations of MPS VII. In Brazil, Mepsevii

is approved for the treatment of MPS VII for patients of all ages.

Our small molecule pipeline includes UX007, which is in clinical development for the treatment of long-chain fatty acid oxidation disorders, or LC-FAOD:

• UX007 is a synthetic triglyceride with a specifically designed chemical

composition being studied for the treatment of LC-FAOD, which is a set of

rare metabolic diseases that prevents the conversion of fat into energy and

can cause low blood sugar, muscle rupture, and heart and liver disease. We

      intend to submit a new drug application, or NDA, to the U.S. Food and Drug
      Administration, or FDA, for the treatment of LC-FAOD in mid-2019 and are
      continuing discussions with EU regulatory authorities.

Our gene therapy pipeline includes DTX301 and DTX401 in clinical development for the treatment of two diseases:

• DTX301 is an adeno-associated virus 8, or AAV8 gene therapy product

candidate designed for the treatment of patients with ornithine

transcarbamylase, or OTC, deficiency. OTC is part of the urea cycle, an

enzymatic pathway in the liver that converts excess nitrogen, in the form of

ammonia, to urea for excretion. OTC deficiency is the most common urea cycle

disorder and leads to increased levels of ammonia. Patients with OTC

deficiency suffer from acute hyperammonemic episodes that can lead to

hospitalization, adverse cognitive and neurological effects, and death. We

have reported positive data from the first and second dose cohorts of the

Phase 1/2 study, and expect data from the third dose cohort in mid-2019.

• DTX401 is an AAV8 gene therapy clinical candidate for the treatment of

patients with glycogen storage disease type Ia, or GSDIa, a disease that

arises from a defect in G6Pase, an essential enzyme in glycogen and glucose

metabolism. GSDIa is the most common glycogen storage disease. We have

reported positive data from the first dose cohort of the Phase 1/2 study,

      and expect data from the second dose cohort in mid-2019.


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The following table summarizes our approved products and clinical product
candidate pipeline:

                               [[Image Removed]]

Recent program updates

Approved Products

Crysvita for the treatment of XLH


In February 2019, we and Kyowa Hakko Kirin Co. Ltd, announced positive results
of a 64-week efficacy and safety analysis of the randomized active-controlled
Phase 3 study of Crysvita in children with XLH compared with oral phosphate and
active vitamin D. The results showed that Crysvita was superior to conventional
therapy for all key efficacy endpoints, showing a meaningful improvement in
rickets severity, lower limb deformity, growth, and physical functioning as
demonstrated by increases in distance walked. The 64-week safety profile was
similar to that observed at 40 weeks and in other Crysvita pediatric XLH
studies.

In March 2019, Brazil'sNational Health Surveillance Agency (ANVISA) approved
Crysvita for the treatment of XLH in adult and pediatric patients one year of
age and older. We have submitted regulatory filings in various other Latin
American countries.

In the United States, we have submitted supplemental Biologics License Applications, or sBLAS, based on data from the Phase 3 studies of Crysvita in adult and pediatric patients.

Earlier this year, we also received a specific J-code for Crysvita from the Centers for Medicare and Medicaid services.

Clinical Product Candidates

UX007 for the treatment of Long Chain Fatty-Acid Oxidation Disorders, or LC-FAOD


In January 2019, we announced positive topline data from the ongoing long-term
extension study of UX007 in patients with LC-FAOD, demonstrating sustained
reductions in the duration and frequency of major clinical events, or MCEs, and
a long-term safety profile similar to what has previously been seen with UX007.
A total of 75 patients are enrolled in the study including 24 patients who were
previously enrolled in the company-sponsored Phase 2 study, 20 naïve patients
who had not previously been treated with UX007 and 31 patients from expanded
access or investigator-sponsored studies. Patients who previously completed the
Phase 2 company-sponsored study and rolled over to the extension study received
treatment for an additional 78 weeks (minimum of 3 years of total UX007
treatment). The median annualized MCE and duration rates during the extension
treatment period were zero. Over the entire treatment period, patients had a 67
percent reduction in median annualized event rate and a 66 percent reduction in
the median annualized duration rate. Patients who were naïve to UX007 at study
entry have received up to 78 weeks of treatment. These patients have
demonstrated a 70 percent reduction in the median annualized event rate (2.3
events/year pre-UX007 to 0.7 events/year during

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extension study treatment period) and an 80 percent reduction in the median
annualized duration rate (10.0 days/year pre-UX007 treatment to 2.0 days/year
during extension study treatment period). Overall, the safety profile observed
in the long-term extension study was consistent with what has been previously
observed with UX007. The most common treatment-related adverse events were
diarrhea, vomiting, and abdominal pain. One patient discontinued due to a
treatment-related adverse event. There were two deaths during the extension
study, both deemed to be related to disease progression and not due to treatment
with UX007. One of these patients was naïve to UX007 and one was previously in
an investigator-sponsored study. Both patients had Trifunctional Protein (TFP)
Deficiency type LC-FAOD, a type known to have a high mortality rate, and both
had experienced severe disease manifestations when initiating UX007 treatment in
the extension study.

Ultragenyx is on track to submit a New Drug Application (NDA) for UX007 for the
treatment of LC-FAOD in mid-2019. The submission will include data from a
company-sponsored Phase 2 study of UX007 in 29 patients, data from the long-term
safety and efficacy extension study in 75 patients, a retrospective medical
record review of 20 original compassionate use patients, data from 70 patients
treated through expanded access, and a randomized controlled
investigator-sponsored study of 32 patients showing an effect of triheptanoin on
cardiac function.

In April 2019, we announced that the FDA has granted Fast Track designation and Rare Pediatric Disease designation to UX007 for the treatment of LC-FAOD.

DTX401 for the treatment of glycogen storage disease type Ia, or GSDIa


In February 2019, we announced positive topline 24-week data from the first dose
cohort of the Phase 1/2 study of DTX401 in GSDIa. All three patients in the
first, lowest-dose cohort received a single dose of 2.0 x 10^12 GC/kg. After 24
weeks of treatment, all three patients have either increased or maintained their
time to hypoglycemia during the controlled fasting challenge compared to
baseline. All three patients continue to show a clinical response with
additional improvements in glucose control reflected by prolonged time to
hypoglycemia during a controlled fasting challenge and by reductions in the use
of cornstarch to maintain normal glucose levels throughout the day and
overnight. The first patient in Cohort 1 demonstrated sustained improvement in
time to hypoglycemia of 6.8 hours at Week 24, from 3.8 hours at baseline and 7.7
hours at Week 12. Patient 2 showed a further improvement in time to hypoglycemia
to 13.1 hours at Week 24, from 4.1 hours at baseline and 9.0 hours at Week 12.
Patient 3 continued to show a clinical response, and maintained the improvement
in time to hypoglycemia of 6.5 hours at Week 24, from 5.4 hours at baseline and
6.5 hours at Week 12. As of February 20, 2019, there were no infusion-related
adverse events and no treatment-related serious adverse events reported. All
adverse events have been Grade 1 or 2. Patients 1 and 2 had mild elevations in
ALT, similar to what has been observed in other programs using AAV-based gene
therapy, and were successfully treated with a tapering course of steroids.

Data from the next dose cohort are expected in mid-2019.

Other Development

In February 2019 we announced the appointment of Shehnaaz Suliman, M.D., to the company's Board of Directors, effective January 30, 2019. Most recently Dr. Suliman was Senior Vice President of Corporate Development and Strategy of Theravance Biopharma, Inc.

Financial Operations Overview

We are a biopharmaceutical company with a limited operating history. To date, we have invested substantially all of our efforts and financial resources in identifying, acquiring, and developing our products and product candidates, including conducting clinical studies and providing selling, general and administrative support for these operations. To date, we have funded our operations primarily from the sale of equity securities.


We have incurred net losses in each year since inception. Our net loss was $96.8
million for the three months ended March 31, 2019 and our net income was $30.3
million for the three months ended March 31, 2018, which includes the gain from
the sale of a priority review voucher of $130.0 million received from the FDA in
connection with the approval of Mepsevii. Substantially all of our net losses
have resulted from costs incurred in connection with our research and
development programs and from selling, general and administrative costs
associated with our operations.

We record revenue from our collaboration and license agreements and from the
sale of our two approved products - Crysvita and Mepsevii. In addition, we also
record sales of certain products on a "named patient" basis, which are allowed
in certain countries prior to regulatory approval. For the three months ended
March 31, 2019 and 2018, we recorded $14.0 million and $15 thousand,
respectively, in collaboration and license revenue for Crysvita sales and $0.3
and $9.3 million, respectively, for providing certain research and development
services under our collaboration and license arrangement with Bayer. For the
three months ended March 31, 2019 and 2018, we recorded $3.9 million and $1.3
million, respectively, in product sales from our approved products and named
patient sales in certain countries.

Critical Accounting Policies and Significant Judgments and Estimates


Our management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with GAAP. The preparation of these consolidated
financial statements

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requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the reported
expenses incurred during the reporting periods. Our estimates are based on our
historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. There have been no material
changes in our critical accounting policies during the three months ended March
31, 2019, as compared to those disclosed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Critical Accounting
Policies and Significant Judgments and Estimates" in our Annual Report.

Results of Operations

Comparison of the three months ended March 31, 2019 to the three months ended March 31, 2018:

Revenue (dollars in thousands)



                                     Three Months Ended March 31,          Dollar           %
                                      2019                  2018           Change        Change
Collaboration and license
revenue:
KHK (Crysvita)                   $        13,954       $           15     $  13,939             *
Bayer                                        284                9,347        (9,063 )         -97 %
Total collaboration and license
revenue                                   14,238                9,362         4,876            52 %
Product sales:
Crysvita                                     588                    -           588             *
Mepsevii                                   2,673                1,119         1,554           139 %
UX007                                        673                  196           477           243 %
Total product sales                        3,934                1,315         2,619           199 %
Total revenues                   $        18,172$       10,677$   7,495            70 %
* not meaningful

We recognized $14.0 million and $15 thousand in profit sharing and royalty revenue from our collaboration and license agreement with KHK for the three months ended March 31, 2019 and 2018, respectively, as a result of the approval of Crysvita in Europe in November 2017 and in the U.S. in April 2018.


We recognized $0.3 million and $9.3 million in collaboration and license revenue
from our research arrangement with Bayer for the three months ended March 31,
2019 and 2018, respectively. The decrease is due to the transition of the
clinical development to Bayer as part of the research arrangement.

The increase in product sales of $2.6 million for the three months ended March
31, 2019 compared to the same period in 2018 is primarily due to the approval of
Mepsevii in November 2017 resulting in an increase in sales in the U.S. and
increase in sales of certain products under our named patient program in certain
countries.

Cost of Sales (dollars in thousands)



                          Three Months Ended March 31,          Dollar         %
                           2019                  2018           Change       Change
         Cost of sales $         452         $         225     $    227          101 %


We recognized an increase of $0.2 million in cost of sales related to our
approved products for the three months ended March 31, 2019, compared to the
same period in 2018. The cost of sales includes a reserve for excess inventory
of none and $0.2 million, for the three months ended March 31, 2019 and 2018,
respectively. Prior to the approval of our approved products, manufacturing and
related costs were expensed; accordingly, these costs were not capitalized and
as a result are not fully reflected in the costs of sales during the current
period. If manufacturing and related costs were capitalized prior to the
approval period, we expect that cost of sales for the three months ended March
31, 2019 and 2018 would have been approximately $0.7 million and $0.4 million,
respectively, for our commercial product sales, which includes a reserve for
excess inventory of none and $0.2 million, respectively. We expect inventory to
increase as we produce Mepsevii at costs that reflect the full costs of
manufacturing similar biologic products. Similarly, we expect cost of sales to
increase in relation to product revenues as we deplete inventories that we had
expensed prior to receiving FDA approval.

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Research and Development Expenses (dollars in thousands)



                                    Three Months Ended March 31,           Dollar             %
                                      2019                 2018            Change           Change
Crysvita                         $       10,321$       11,223$      (902 )             -8 %
Mepsevii                                  5,458                6,333            (875 )            -14 %
UX007                                    12,368               11,943             425                4 %
DTX301                                   12,127                3,426           8,701              254 %
DTX401                                    8,812                5,958           2,854               48 %
DTX201                                      780                9,960          (9,180 )            -92 %
Translational Research                    9,890                7,519           2,371               32 %
Other research costs                     18,349               19,142            (793 )             -4 %

Total research and development $ 78,105$ 75,504 $

   2,601
expenses                                                                                            3 %

Research and development expenses increased $2.6 million for the three months ended March 31, 2019, compared to the same period in 2018. The increase in research and development expenses is primarily due to:

• for Crysvita, a decrease of $0.9 million for the three months ended March

31, 2019 primarily related to reduced clinical trial activity with the

progressive completion of our extension studies and reduced allocation of

       employees and contractors to R&D support activities, net of KHK
       reimbursement;

• for Mepsevii, a decrease of $0.9 million for the three months ended March

31, 2019, primarily related to reduced clinical trial activity with the

progressive completion of our extension studies;

• for UX007, an increase of $0.4 million for the three months ended March 31,

2019, primarily related to increased filing preparation expense for the

FAOD program net of reduced clinical trial expense for the wind down of the

Glut 1 program and reduced manufacturing expense due to the timing of drug

substance campaigns;

• for DTX301, an increase of $8.7 million for the three months ended March

31, 2019, primarily related to increases in manufacturing and quality

activities in support of our clinical studies;

• for DTX401, an increase of $2.9 million for the three months ended March

31, 2019, related to clinical manufacturing expense process development

expense, and the progressive enrollment of our Phase 1/2 clinical study;

• for DTX201, a decrease of $9.2 million for the three months ended March 31,

2019, primarily related to the completion of clinical manufacturing and

regulatory support activities for our Bayer collaboration agreement and the

corresponding period decrease in intangible asset amortization



    •  for translational research, an increase of $2.4 million for the three
       months ended March 31, 2019, primarily related to research, process
       development, and manufacturing activities;

• for other research and development costs, a decrease of $0.8 million for

the three months ended March 31, 2019, primarily due to reduced operating

expense for terminated programs net of increases in general operating and

overhead expenses in support of our clinical and research program pipeline.



We expect our research and development expenses to increase in the future as we
advance our product candidates through clinical development. The timing and
amount of expenses incurred will depend largely upon the outcomes of current or
future clinical studies for our product candidates as well as the related
regulatory requirements, manufacturing costs, and any costs associated with the
advancement of our preclinical programs.

Selling, General and Administrative Expenses (dollars in thousands)



                                       Three Months Ended March 31,           Dollar            %
                                         2019                 2018         

Change Change Selling, general and administrative $ 38,829$ 31,435$ 7,394

              24 %


Selling, general and administrative expenses increased $7.4 million for the
three months ended March 31, 2019, compared to the same period in 2018. The
increase in selling, general and administrative expenses was primarily due to
increases in personnel costs resulting from an increase in the number of
employees in support of our commercial activities, stock-based compensation,
commercialization costs, and professional services costs.

We expect selling, general and administrative expenses to increase to support our organizational growth and for our expected staged build out of our commercial organization over the next several years related to our approved products and multiple clinical-stage product candidates.

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Interest Income (dollars in thousands)




                            Three Months Ended March 31,        Dollar         %
                              2019                2018          Change      Change
          Interest income $       3,086$       1,737$ 1,349          78 %




Interest income increased $1.3 million for the three months ended March 31,
2019, compared to the same period in 2018, primarily due to an increase in the
balance of our invested funds and due to an increase in yields on our investment
portfolio.

Gain from Sale of Priority Review Voucher (dollars in thousands)



                                    Three Months Ended March 31,           Dollar           %
                                     2019                  2018            Change         Change
Gain from sale of priority
review voucher                   $           -         $     130,000$ (130,000 )         -100 %




The gain from the sale of the Priority Review Voucher, or PRV, of $130.0 million
for the three months ended March 31, 2018 was due to the completion of the sale
of the PRV we received from the FDA in connection with the approval of Mepsevii.

Other Expense (dollars in thousands)



                          Three Months Ended March 31,        Dollar         %
                           2019                2018           Change       Change
          Other expense $      (412 )$        (4,958 )$ 4,546          -92 %


Other expense decreased $4.5 million for the three months ended March 31, 2019,
compared to the same period in 2018. The expense recognized during the three
months ended March 31, 2018 was primarily due to the recognition of cumulative
foreign currency translation losses related to the substantial liquidation of
subsidiaries with a functional currency other than the U.S. Dollar, which did
not recur in 2019. The recognized foreign currency losses from the three months
ended March 31, 2018 were substantially offset by the reclassification
adjustment reported as a component of other comprehensive income (loss).

Provision for Income Taxes (dollars in thousands)



                                 Three Months Ended March 31,         Dollar         %
                                  2019                   2018         Change       Change

Provision for income taxes $ (216 ) $ (39 )$ (177 ) 454 %

The provision for incomes taxes increased $0.2 million for the three months ended March 31, 2019, compared to the same period in 2018. This was primarily due to the increase in commercialization activities in Europe and Latin America.

Liquidity and Capital Resources

We have funded our operations primarily from the sale of equity securities.


As of March 31, 2019, we had $715.3 million in available cash, cash equivalents,
and investments. We believe that our existing capital resources will be
sufficient to fund our projected operating requirements for at least the next
twelve months. Our cash, cash equivalents and investments are held in a variety
of deposit accounts, interest-bearing accounts, corporate bond securities, U.S
government securities and money market funds. Cash in excess of immediate
requirements is invested with a view toward liquidity and capital preservation,
and we seek to minimize the potential effects of concentration and credit risk.

During the three months ended March 31, 2019, the proceeds from our at-the-market, or ATM, offering were approximately $19.3 million after commissions and other offering costs. As of March 31, 2019, $26.3 million remained to be sold under our ATM facility. In February 2019, we completed an underwritten public offering in which we sold 5,833,333 shares of common stock and received net proceeds of approximately $330.4 million.

The following table summarizes our cash flows for the periods indicated (in thousands):

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                                                         Three Months Ended March 31,
                                                          2019                  2018
Cash used in operating activities                    $       (95,775 )$      (89,478 )
Cash used in investing activities                           (101,193 )            (71,028 )
Cash provided by financing activities                        353,617        

286,419

Effect of exchange rate changes on cash                         (198 )      

249

Net increase in cash, cash equivalents and
restricted cash                                      $       156,451

$ 126,162

Cash Used in Operating Activities


Our primary use of cash is to fund operating expenses, which consist primarily
of research and development and commercial expenditures. Due to our significant
research and development expenditures, we have generated significant operating
losses since our inception. Cash used to fund operating expenses is affected by
the timing of when we pay these expenses, as reflected in the change in our
outstanding accounts payable and accrued expenses.

Cash used in operating activities for the three months ended March 31, 2019 was
$95.8 million and reflected a net loss of $96.8 million and $0.8 million for the
amortization of the discount paid on purchased investments, offset by non-cash
charges of $20.2 million for stock-based compensation, $2.1 million for
depreciation and amortization of intangible asset acquired, and $0.6 million of
non-cash foreign currency remeasurement losses in connection with fluctuations
of exchange rates related to intercompany transactions with foreign subsidiaries
that are denominated in our reporting currency. Cash used in operating
activities also reflected a $2.9 million decrease due to an increase in accounts
receivable due to the commercialization of Mepsevii and Crysvita, a $3.6 million
decrease due to an increase in inventory as we build out our commercial
inventory supplies as we commercialize Mepsevii, a decrease of $2.4 million due
to an increase in prepaid expenses and other current assets primarily due to an
increase in amounts due from a collaboration partner, a $6.9 million decrease
due to the addition of the right-of-use assets net of amortization during the
period, a $0.2 million decrease in accounts payable primarily due to the timing
of payments and receipt of invoices, and a $12.9 million decrease in accrued
expenses and other liabilities primarily due to a decrease in accrued bonus due
to the payout of the 2018 annual bonus, the derecognition of deferred rent
obligations for the new lease accounting guidance, and accrued expenses due to
the timing of the receipt of invoices, offset by an increase of $0.9 million in
other assets and a $6.8 million increase due to the addition of lease
liabilities net of amortization during the period.

Cash used in operating activities for the three months ended March 31, 2018 was
$89.5 million and reflected net income of $30.3 million, non-cash charges of
$18.8 million for stock-based compensation and $6.2 million for depreciation and
amortization of intangible asset acquired, offset by $130.0 million for the gain
from sale of the PRV, and $0.2 million for the amortization of discount paid on
purchased investments. There was also $4.8 million of non-cash foreign currency
remeasurement losses in connection with the substantial liquidation of
subsidiaries due to a change in the Company's tax structure and fluctuations of
exchange rates related to intercompany transactions with foreign subsidiaries
that are denominated in our reporting currency. Cash used in operating
activities also reflected a $5.1 million increase in prepaid expenses and other
current assets, a $0.3 million increase in other assets, a $1.3 million decrease
in accounts payable primarily due to the timing of payments and receipt of
invoices, and a $12.6 million decrease in accrued expenses and other liabilities
primarily as a result of a decrease in accrued bonus due to the payout of the
2017 annual bonus and accrued expenses due to the timing of the receipt of
invoices.

Cash Used in Investing Activities


Cash used in investing activities for the three months ended March 31, 2019 was
$101.2 million and related to purchases of investments of $260.7 million and
purchases of property and equipment of $3.1 million, offset by proceeds from
maturities of investments of $140.0 million and the sale of investments of $22.6
million.

Cash used in investing activities for the three months ended March 31, 2018 was
$71.0 million and related to purchases of investments of $260.8 million and
purchases of property and equipment of $0.5 million, offset by proceeds from the
sale of PRV of $130.0 million, and proceeds from maturities of investments of
$60.3 million.

Cash Provided by Financing Activities


Cash provided by financing activities for the three months ended March 31, 2019
was $353.6 million and was comprised of $330.4 million from the sale of common
stock in our underwritten public offering, $19.3 million from the sale of common
stock in our ATM offering, and $3.9 million in net proceeds from the issuance of
common stock pursuant to equity awards.

Cash provided by financing activities for the three months ended March 31, 2018
was $286.4 million and was comprised of $271.0 million from the sale of common
stock in our underwritten public offering $11.8 million from the sale of common
stock in our ATM offering, and $3.6 million in net proceeds from the issuance of
common stock pursuant to equity awards.

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Funding Requirements


We anticipate, excluding non-recurring items, that we will continue to generate
annual losses for the foreseeable future, and we expect the losses to increase
as we continue the development of, and seek regulatory approvals for, our
product candidates, and continue with commercialization of approved products.
Due to certain non-recurring or infrequent items like the sale of priority
review vouchers, we may have lower levels of losses in the near term in
quarterly periods that may not be indicative of future periods or trends. We
will likely require additional capital to fund our operations, to complete our
ongoing and planned clinical studies, to commercialize our products, and to
continue investing in early-stage research capabilities to promote our pipeline
growth and to further develop our general infrastructure, including building our
own Good Manufacturing Practices (GMP) gene therapy manufacturing facility, and
such funding may not be available to us on acceptable terms or at all.

If we are unable to raise additional capital in sufficient amounts or on terms
acceptable to us, we may be required to delay, limit, reduce the scope of, or
terminate one or more of our clinical studies, research and development
programs, future commercialization efforts, or grant rights to develop and
market product candidates that we would otherwise prefer to develop and market
ourselves.

Our future funding requirements will depend on many factors, including the following:

• the scope, rate of progress, results and cost of our clinical studies,

nonclinical testing, and other related activities;

• the cost of manufacturing clinical supplies, and establishing commercial

supplies, of our product candidates and any products that we may develop;


  • the number and characteristics of product candidates that we pursue;


  • the cost, timing, and outcomes of regulatory approvals;

• the cost and timing of establishing our commercial infrastructure, and

       distribution capabilities; and


    •  the terms and timing of any collaborative, licensing, and other
       arrangements that we may establish, including any required upfront
       milestone and royalty payments thereunder.


We expect to satisfy future cash needs through existing capital balances and
through some combination of public or private equity offerings, debt financings,
collaborations, strategic alliances, licensing arrangements, and other marketing
and distribution arrangements. Please see "Risk Factors-Risks Related to Our
Financial Condition and Capital Requirements."

Contractual Obligations and Commitments


We have contractual obligations from our operating leases, manufacturing and
service contracts, licenses, royalties, development and collaboration
arrangements, and other research and development activities. The following table
summarizes our significant binding contractual obligations at March 31, 2019 (in
thousands):

                                                                  Payments due by period*
                                        Less than                                            More than
                                          1 year        1 to 3 years       3 to 5 years       5 years        Total
Operating leases                        $    8,927$       16,119$       14,474$   11,776$ 51,296
Manufacturing and services contracts         4,265                957                  -              -        5,222
Total                                   $   13,192$       17,076     $ 

14,474 $ 11,776$ 56,518 * Includes additional lease payments under the new lease and lease amendments entered into in April 2019



The terms of certain of our licenses, royalties, development and collaboration
agreements, as well as other research and development activities, require us to
pay potential future milestone payments based on product development success.
The above table excludes such obligations as the amount and timing of such
obligations are unknown or uncertain.

Off-Balance Sheet Arrangements

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

                                       23

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© Edgar Online, source Glimpses

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