ALBIREO PHARMA, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this quarterly report and our audited financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSEC . In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results, performance or experience could differ materially from what is indicated by any forward-looking statement due to various important factors, risks and uncertainties, including, but not limited to, those set forth under "Cautionary Note Regarding Forward-Looking Statements" included elsewhere in this quarterly report or under "Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K for the year endedDecember 31, 2021 , in Item 1A of Part II of this Quarterly Report on Form 10-Q, or in other filings that we make with theSEC . Overview We are a commercial-stage biopharmaceutical company focused on the development and commercialization of novel bile acid modulators to treat orphan pediatric liver diseases and other liver or gastrointestinal diseases and disorders. Our product Bylvay has been approved inthe United States for the treatment of pruritus in patients with progressive familial intrahepatic cholestasis (PFIC) ages 3 months or older, and authorized inEurope for the treatment of PFIC in patients ages 6 months or older. InOctober 2021 , theU.S. Food and Drug Administration , or FDA, granted the Company orphan drug exclusivity for Bylvay for the treatment of pruritus in patients ages 3 months or older with PFIC. InJuly 2021 , theEuropean Medicines Agency , or EMA, granted the Company orphan drug exclusivity for Bylvay for the treatment of patients 6 months or older with PFIC. InSeptember 2021 , Bylvay was also granted marketing authorization by theUK Medicines and Healthcare Products Regulatory Agency , or MHRA, for the treatment of PFIC in patients 6 months or older. Bylvay is available by prescription to patients in theU.S. and became available by prescription to patients inGermany inSeptember 2021 and in theUnited Kingdom in the second quarter of 2022. PFIC is a rare, life-threatening genetic disorder affecting young children and Bylvay is the first approved drug treatment in the disease. We are also pursuing the development of Bylvay in biliary atresia and in Alagille syndrome, or ALGS, each of which is a rare, life threatening disease that affects the liver and for which there is no approved pharmacologic treatment option. We initiated a pivotal clinical trial of Bylvay in biliary atresia, the BOLD trial, in the first half of 2020. InNovember 2022 , we announced completion of enrollment in the BOLD trial. We expect topline results from the BOLD trial in 2024. InOctober 2022 , we announced topline results from our pivotal trial of Bylvay in ALGS, the ASSERT trial, and we intend to complete regulatory submissions for Bylvay in patients with ALGS inthe United States andEurope no later than the first quarter of 2023, in anticipation of potential regulatory approval and commercial launch in the second half of 2023. We are expanding development to compounds that are intended for adult liver and viral diseases. Our lead candidate for adult liver diseases, A3907, is a selective inhibitor of the apical sodium-dependent bile acid transporter (ASBT) that has, based on animal studies, high predicted oral bioavailability and systemic exposures in man. As a result, A3907 has the potential to not only affect the bile acid pool by increased bile acid excretion in the stools but also through other pathways, including increased urinary bile acid excretion. This unique approach may yield greater dosing flexibility, greater efficacy and lower rates of adverse events, such as diarrhea, associated with the non-systemic IBAT inhibitors acting locally in the intestine. InDecember 2021 , we announced topline results from our Phase 1 clinical trial in healthy adult subjects to investigate the safety, tolerability, pharmacokinetics of orally administered A3907. In the top-line results the trial achieved both primary and secondary objectives. A3907 demonstrated a positive safety profile and was well tolerated in the Phase 1 clinical trial at systemic exposures that demonstrated therapeutic benefits in preclinical models. With the potential to inhibit ileal, renal and hepatic ASBT, we hope A3907 will provide the optimal balance of efficacy and tolerability in patients in multiple liver diseases. A composition of matter patent for A3907 has been granted, with expiration in 2040 without patent term extension. We expect to initiate a Phase 2 trial for A3907 in adult liver disease by the end of 2022. 24
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We also have a preclinical program in adult liver and viral diseases. Our lead preclinical candidate for adult viral and liver diseases is A2342, a potent small molecule inhibitor of the sodium-taurocholate co-transporting peptide (NTCP). NTCP is a key transporter of bile acids into the liver cells and also serves as the entry mechanism for the hepatitis B (HBV) and hepatitis D (HDV) viruses. A2342 protects primary human hepatocytes from HBV infection in vitro. In addition, A2342 reduces markers of infection in HBV-infected humanized mice. A2342 has demonstrated target engagement in non-human primates with biomarker increases comparable to increases achieved in humans by a now commercial subcutaneous peptide NTCP inhibitor. A composition of matter patent for A2342 has been granted, with expiration in 2040 without patent term extensions, and IND enabling studies are being completed. We expect to initiate a Phase 1 trial for A2342 in healthy volunteers by the end of 2022. Preclinical efforts with other bile acid modulator approaches continue. The first IBAT inhibitor developed by Albireo is elobixibat, which was approved inJapan andThailand for the treatment of chronic constipation and is marketed by our partner EA Pharma inJapan and its sublicensee inThailand .
Bylvay - Our Lead Product for PFIC.
Bylvay (odevixibat) was approved by the FDA onJuly 20, 2021 for the treatment of pruritus in patients ages 3 months or older with PFIC, and authorized by the EMA onJuly 16, 2021 for the treatment of patients 6 months or older with PFIC. Bylvay was also granted marketing authorization by the MHRA onSeptember 7, 2021 for the treatment of patients 6 months or older with PFIC. We also received a rare pediatric disease priority review voucher (PRV) from the FDA in connection with theU.S. approval of Bylvay. InSeptember 2021 , we sold the PRV for$105.0 million . Bylvay is available for reimbursement by prescription to patients in theU.S. ,Germany and theUnited Kingdom . InJuly 2021 , the EMA granted the Company orphan drug exclusivity for Bylvay for the treatment of patients 6 months or older with PFIC. InOctober 2021 , the FDA granted the Company orphan drug exclusivity for Bylvay for the treatment of pruritus in PFIC patients ages 3 months or older. The precise prevalence of PFIC is unknown, and we are not aware of any patient registries or other method of establishing with precision the actual number of patients with PFIC in any geography. PFIC has been estimated to affect between one in every 75,000 children born worldwide. Based on the published incidence, published regional populations, and estimated median life expectancies, we estimate the prevalence of PFIC across the spectrum of the disease to be approximately 15,000 patients worldwide, not includingChina andIndia , but we are not able to estimate the prevalence of PFIC with precision. Apart from rights we granted to third parties in the below agreements and our royalty obligation under our agreement with Sagard, we hold global rights to Bylvay unencumbered. Our current plan is to commercialize Bylvay ourselves inthe United States andEurope . We entered into a co-promotion agreement with Travere Therapeutics, Inc. to promote Bylvay inthe United States . The initial term of the co-promotion was two years from theJuly 2021 launch of Bylvay, terminable at will by either party after one year following launch. InJune 2022 , the parties mutually agreed to terminate the agreement upon the one year anniversary of the launch, with such termination effectiveJuly 20, 2022 . We are continuing to commercialize Bylvay ourselves inthe United States . We have also entered into license agreements with third parties to commercialize Bylvay in certain other jurisdictions, subject to regulatory approval in those jurisdictions includingMedison Pharma Canada Inc. forCanada ,Medison Pharma Ltd. forIsrael , Gen ?laç ve Sa?lIk Ürünleri Sanayi ve Ticaret A.?. forTurkey , Genpharm Services forSaudi Arabia ,Bahrain ,Kuwait ,Oman ,Qatar , and theUAE ,Jadeite Medicines Inc. forJapan , andSwixx Biopharma AG for Central and Eastern European Countries, and we are identifying potential partners for other regions. Bylvay is currently the only approved drug for the treatment of patients with PFIC. Ursodeoxycholic acid, or UDCA, is approved inFrance only for PFIC type 3, and inthe United States and elsewhere for the treatment of primary biliary cholangitis, or PBC. However, many PFIC patients do not respond well to UDCA, undergo partial external bile diversion, or PEBD, surgery and often require liver transplantation. PEBD surgery is a life-altering and undesirable procedure in which bile is drained outside the body to a stoma bag that must be worn by the patient 24 hours a day.
Other
We are also pursuing the development of Bylvay in patients with biliary atresia,
another rare, life-threatening disease that affects the liver and for which
there is no approved pharmacologic treatment option. In
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theEuropean Commission granted orphan designation to odevixibat for the treatment of biliary atresia, and inJanuary 2019 , the FDA granted orphan drug designation to odevixibat for the treatment of biliary atresia. We initiated the BOLD clinical trial, a global pivotal trial and the largest prospective intervention trial ever conducted in biliary atresia, in the first half of 2020. InOctober 2022 we announced completion of enrollment in the trial and we expect topline results in 2024. We believe biliary atresia is one of the most common rare pediatric liver diseases, and is the leading cause of liver transplants in children. Our double-blind, placebo controlled pivotal trial in biliary atresia is designed to enroll approximately 200 patients at 70 sites globally. Patients will receive either placebo or odevixibat once daily at 120µg/kg. The primary endpoint is survival with native liver after two years of treatment. Biliary atresia is a partial or total blocking or absence of large bile ducts that causes cholestasis and resulting accumulation of bile that damages the liver. The estimated worldwide incidence of biliary atresia is between 6 and 10 for every 100,000 live births. We estimate the prevalence of biliary atresia to be approximately 18,000 patients across theU.S. andEurope , and approximately 27,000 combined in other jurisdictions worldwide, but we are not able to estimate the prevalence of biliary atresia with precision. There are currently no drugs approved for the treatment of biliary atresia. The current standard of care is a surgery known as the Kasai procedure, or hepatoportoenterostomy, in which the obstructed bile ducts are removed and a section of the small intestine is connected to the liver directly. However, only an estimated 25% of those initially undergoing the Kasai procedure will survive to their twenties without need for liver transplantation. In addition, we initiated a pivotal trial of Bylvay in ALGS, the ASSERT trial, in the fourth quarter of 2020. The double-blind, randomized, placebo-controlled trial was designed to evaluate the safety and efficacy of 120 µg /kg/day Bylvay (odevixibat) for 24 weeks in relieving pruritus in patients with ALGS. Key secondary endpoints measure serum bile acid levels and safety and tolerability. The trial enrolled 52 patients aged 0 to 17 years of age with a genetically confirmed diagnosis of ALGS across 21 sites inNorth America ,Europe ,Middle East andAsia Pacific . The primary efficacy endpoint was a change from baseline to month 6 (weeks 21 to 24) in pruritus measured by scratching with the PRUCISION Observer-Reported Outcome (ObsRO) scratching score caregiver instrument (0-4 point scale). The key secondary efficacy endpoint was a change in serum bile acid responses from baseline to the average of weeks 20 and 24. InOctober 2022 , we announced topline results from the ASSERT trial. In the primary analysis, the study met the primary endpoint showing statistically significant reduction in pruritus as measured by the ObsRO scratching score (0-4 point scale), from baseline at month 6 (weeks 21 to 24), compared to the placebo arm (p=0.002). The study also met the key secondary endpoint showing a statistically significant reduction in serum bile acid concentration from baseline to the average of weeks 20 and 24 (compared to the placebo arm p=0.001). Statistically significant improvements in multiple sleep parameters were observed as early as week 1-4 compared to patients on placebo with continued improvement through week 24. In the study, there were no patient discontinuations. Bylvay was well tolerated, with an overall adverse event incidence similar to placebo and a low incidence of drug-related diarrhea (11.4% vs. 5.9% placebo). ALGS is a genetic condition associated with liver, heart, eye, kidney and skeletal abnormalities. In particular, ALGS patients have fewer than normal bile ducts inside the liver, which leads to cholestasis and the accumulation of bile and causes scarring in the liver. ALGS is estimated to affect between one in every 50,000 children born worldwide. We estimate the prevalence of ALGS to be approximately 12,000 patients across theU.S. andEurope , and approximately 13,000 combined in other jurisdictions worldwide, but we are not able to estimate the prevalence of ALGS with precision. Current treatment for ALGS is generally in line with current treatments for PFIC as described above. InAugust 2012 , theEuropean Commission granted orphan designation to odevixibat for the treatment of ALGS. InOctober 2018 , the FDA granted orphan drug designation to odevixibat for the treatment of ALGS. With the results from the ASSERT trial, we intend to complete regulatory submissions inthe United States andEurope no later than the first quarter of 2023, in anticipation of potential regulatory approval and commercial launch in the second half of 2023. We continue to evaluate potential clinical development in other indications, including primary sclerosing cholangitis, which refers to swelling (inflammation), scarring, and destruction of bile ducts inside and outside
of
the
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liver. The first symptoms are typically fatigue, itching and jaundice, and many patients with sclerosing cholangitis also suffer from inflammatory bowel disease. The estimated incidence of primary sclerosing cholangitis is 9 cases per 100,000 people. There are currently no drugs approved for the treatment of sclerosing cholangitis. First-line treatment is typically off-label UDCA, although UDCA has not been established to be safe and effective in patients with sclerosing cholangitis in well controlled clinical trials. Since inception, we have incurred significant operating losses. As ofSeptember 30, 2022 , we had an accumulated deficit of$421.0 million . To date, we have financed our operations primarily through issuances of equity or convertible debt, upfront fees paid upon entering into license agreements, payments received upon the achievement of specified milestone events under license agreements, grants and venture debt borrowings, theHealthCare Royalty Partners III, L.P. (HCR) royalty monetization transactions, and theSagard Healthcare Partners (Delaware) LP ("Sagard") royalty monetization transactions. As previously disclosed, onSeptember 22, 2022 , we entered into a purchase and sale agreement with Sagard for the sale of a royalty on revenues generated from Bylvay (odevixibat), or the Purchase Agreement, for an aggregate purchase price of$115.0 million payable upon the closing of the transaction, which occurred onSeptember 22, 2022 . In consideration for the payment of such purchase price, Sagard is entitled to receive tiered, sales-based royalty payments on the worldwide annual consolidated net revenues of Bylvay. These royalty obligations payable to Sagard are capped at$184.0 million which will be increased to$230.0 million if Sagard has not received aggregate royalty payments of$184.0 million byDecember 31, 2028 . In addition, if the aggregate amount of royalty payments received by Sagard as ofDecember 31, 2036 is less than$230.0 million , we have agreed to pay Sagard the difference between the royalty cap and the aggregate amount of all royalty payments received by Sagard as ofDecember 31, 2036 . See Note 1 to the condensed consolidated financial statements in Part I, Item 1 of this report for additional information about our obligations under the Purchase Agreement. We expect to continue to incur significant expenses and increasing operating losses as we continue our development of, and seek marketing approvals for, our product candidates, commercialize Bylvay, prepare for and begin the commercialization of any other approved products in the future, and add infrastructure and personnel to support our product development and commercialization efforts and operations as a public company inthe United States . To date, inflation has not had a material impact on our business, but if the global inflationary trends continue, we expect appreciable increases in clinical trial, selling, labor, and other operating costs. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases of our product. Our inability or failure to do so could adversely affect our business, financial condition and results of operations. As a commercial-stage company, our revenues, expenses and results of operations are likely to fluctuate significantly from quarter to quarter and year to year. We believe that period-to-period comparisons of our results of operations should not be relied upon as indicative of our future performance.
As of
Financial Operations Overview
The following discussion sets forth certain components of our consolidated statements of operations as well as factors that impact those items.
Revenue
We generate revenue primarily from the receipt of royalty revenue, upfront or
license fees and milestone payments as well as product revenue following our
commercial launch of Bylvay. License agreements with commercial partners
generally include nonrefundable upfront fees and milestone payments. We
recognize revenue on sales of Bylvay when a customer obtains control of the
product, which occurs at a point in time and upon delivery, the receipt of which
is dependent upon the achievement of specified development, regulatory or
commercial milestone events, as well as royalties on product sales of licensed
products, if and when such product sales occur, and payments for pharmaceutical
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ingredient or related procurement services. For these agreements, management
applies judgment in the allocation of total agreement consideration to the
performance obligations on a reliable basis that reasonably reflects the selling
prices that might be expected to be achieved in stand-alone transactions. For
additional information about our revenue recognition, refer to Note 1 to our
condensed consolidated financial statements included in this quarterly report.
We commenced our commercial launch of Bylvay for the treatment of pruritus in
patients with PFIC ages 3 months or older in
We sell Bylvay to a limited number of specialty pharmacies and a specialty distributor which dispense the product directly to patients. The specialty pharmacies and specialty distributor are referred to as our customers. We also sell Bylvay to our customers in theEuropean Union , which includes a limited number of pharmacies. Bylvay was authorized by theEuropean Medicines Agency onJuly 16, 2021 for the treatment of PFIC in patients 6 months or older. Bylvay was also granted marketing authorization by theUK Medicines and Healthcare Products Regulatory Agency (MHRA) inSeptember 2021 for the treatment of PFIC in patients 6 months or older. Product Revenue, Net
We recognize revenue on sales of Bylvay when a customer obtains control of the product, which occurs at a point in time and upon delivery. We provide the right of return to our customers for unopened product for a limited time before and after its expiration date.
However, a portion of our royalty and royalty-related revenues generated from Bylvay will be paid to Sagard pursuant to the Purchase Agreement.
Under Accounting Standards Codification ("ASC") Topic 606, Revenue from
Contracts with Customers ("ASC 606"), we have written contracts with each of our
customers that have a single performance obligation - to deliver products upon
receipt of a customer order - and these obligations are satisfied when delivery
occurs and the customer receives Bylvay. We evaluate the creditworthiness of
each of our customers to determine whether collection is reasonably assured. The
wholesale acquisition cost that we charge our customers for Bylvay is adjusted
to arrive at our estimated net product revenues by deducting (i) estimated
government rebates and discounts related to Medicaid and other government
programs, (ii) estimated costs of incentives offered to certain indirect
customers including patients, (iii) trade allowances, such as invoice discounts
for prompt payment and customer fees, and (iv) allowance for sales returns.
For the three and nine months ended September 30, 2022 , we recognized net sales
of Bylvay totaling approximately $7.5 million and $18.1 million , respectively.
For the three and nine months ended September 30, 2021 , we recognized net sales
of Bylvay totaling approximately $1.1 million and $1.1 million , respectively.
Royalty Revenue
For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
For the three months endedSeptember 30, 2022 and 2021, we recognized revenue of$2.3 million and$2.6 million , respectively, related to our agreement with EA Pharma. For the nine months endedSeptember 30, 2022 and 2021, we recognized revenue of$6.8 million and$7.0 million , respectively, related to our agreement with EA Pharma. We expect that any future revenue recognized under our license agreement with EA Pharma will fluctuate from quarter to quarter and year to year as a result of royalties for the period from EA Pharma, as well as the uncertain timing of future milestone payments, if any. InOctober 2021 , Albireo entered into an agreement withJadeite Medicines Inc. to license, develop and commercialize Bylvay withinJapan . For the three and nine months endedSeptember 30, 2022 and 2021, no revenue was 28
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recognized under the agreement. Currently, Jadeite is commencing bridging and other clinical studies to pursue New Drug Application (NDA) filings and obtain approval inJapan for PFIC, ALGS, and biliary atresia indications. Future royalty revenue recognized under our license agreement with Jadeite will not commence until after NDA approval inJapan . The next anticipated milestone payment will be received upon NDA filings inJapan for Bylvay and the timing of future milestone payments, if any, is uncertain.
Costs and Operating Expenses
Cost of Product Revenue
Cost of product revenue consists of manufacturing and quality headcount costs for sales of Bylvay. All manufacturing costs incurred prior to FDA approval totaled approximately$1.6 million and were not capitalized, and instead were expensed as research and development expenses from 2020 toJuly 2021 . As a result, these costs were excluded from cost of product revenue for sales during the three and nine months endedSeptember 30, 2022 .
Research and Development Expenses
Research and development expenses consist primarily of personnel costs (including salaries, benefits and stock-based compensation) for employees in research and development functions, costs associated with nonclinical and clinical development services, including clinical trials and related manufacturing costs, third-party contract research organizations, or CROs, and related services and other outside costs, including fees for third-party professional services such as consultants. Our nonclinical studies and clinical studies are performed by CROs. We expect to continue to focus our research and development efforts on nonclinical studies and clinical trials of our product candidates. As a result, we expect our research and development expenses to continue to increase for the foreseeable future. Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs such as fees paid to CROs and others in connection with our nonclinical and clinical development activities and related manufacturing. We do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. Successful development of our current and potential future product candidates is highly uncertain. Completion dates and costs for our programs can vary significantly by product candidate and are difficult to predict. As a result, we cannot estimate with any degree of certainty the costs we will incur in connection with development of any of our product candidates. We anticipate we will make determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the results of ongoing and future clinical trials, our ability to enter into licensing, collaboration and similar arrangements with respect to current or potential future product candidates, the success of research and development programs and our assessments of commercial potential.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of personnel costs (including salaries, benefits and stock-based compensation) for our executive, finance and other administrative employees. In addition, selling, general and administrative expenses include fees for third-party professional services, including consulting, information technology, legal and accounting services. Other selling, general and administrative expenses include marketing expenses related to the commercial launch of Bylvay, as well as corporate expenses.
Other Operating Expense, Net
Other operating expense, net consists primarily of foreign currency exchange gains or losses associated with revaluation of intercompany loans.
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Gain from sale of priority review voucher, net of transaction costs
Gain from sale of priority review voucher, net of transaction costs consists of cash proceeds recorded in connection with the sale of the rare pediatric disease priority review voucher received from the FDA in connection with the approval of the Company's product Bylvay (odevixibat).
Loss on Extinguishment of Note Payable, net of discount
Loss on extinguishment of note payable, net of discount consists primarily of the payoff of our Loan and Security Agreement with Hercules.
Interest Expense, Net
Interest expense, net consists primarily of non-cash interest expense recorded in connection with the sale of future royalties, related to sales of elobixibat inJapan , the purchase and sale agreement with Sagard, and both cash and non-cash interest expense associated with our note payable, which we paid off onJuly 27, 2022 . In addition, interest expense, net includes interest income associated with our interest-bearing cash and cash equivalents.
Provision for Income Taxes
Provision for income taxes consists of taxes related to the sale of the PRV, offset by a tax benefit from our ordinary losses. We expect to maintain a full valuation allowance against our net deferred tax assets for the year.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance withUnited States generally accepted accounting principles for interim financial information. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates and assumptions on historical experience and on various assumptions that we believe are reasonable under the circumstances, and we evaluate them on an ongoing basis. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates and judgments. In addition, our reported financial condition and results of operations could vary if new accounting standards are enacted that are applicable to our business. Our critical accounting policies and the methodologies and assumptions we apply under them have not materially changed sinceMarch 1, 2022 , the date we filed our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Due to the commercialization of Bylvay (odevixibat) the Company implemented accounting policies related to revenue recognition and inventory. See Note 1, "Summary of significant accounting policies and basis of presentation" for more information on revenue recognition and inventory accounting policies. For more information on other critical accounting policies, refer to our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 30
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Results of Operations for the Three Months Ended
The following tables summarizes our results of operations for three months ended
Three Months Ended September 30, Change
2022 2021 $
(in thousands)
Revenue
Product revenue, net $ 7,543 $ 1,060 $ 6,483
Royalty revenue 2,289 2,604 (315)
Total revenue 9,832 3,664 6,168
Cost and operating expenses:
Cost of product revenue 612 431 181
Research and development 23,312 21,083 2,229
Selling, general and administrative 20,564 17,612 2,952
Other operating expense, net 1 3,719 (3,718)
Total cost and operating expenses 44,489 42,845 1,644
Operating loss (34,657) (39,181) 4,524
Other (loss) income
Gain from sale of priority review voucher, net of transaction costs - 103,387 (103,387)
Loss on extinguishment of note payable, net of discount (613) - (613)
Interest expense, net (2,530) (3,331) 801
Net (loss) income before income taxes (37,800) 60,875 (98,675)
Provision for income taxes
- 3,789 (3,789)
Net loss $ (37,800) $ 57,086 $ (94,886)
Revenue
Three Months Ended September 30, Change
2022 2021 $
(in thousands)
Product revenue, net $ 7,543 $ 1,060 $ 6,483
Royalty revenue 2,289 2,604 (315)
Total revenue $ 9,832 $ 3,664 $ 6,168 Product revenue, net was$7.5 million for the three months endedSeptember 30, 2022 compared with$1.1 million for the three months endedSeptember 30, 2021 due to higher Bylvay unit product sales. Product revenue, net for the three months endedSeptember 30, 2022 was$4.1 million inthe United States and$3.4 million in international markets. Product revenue, net for the three months endedSeptember 30, 2021 was$0.8 million inthe United States and$0.3 million in International markets. Royalty revenue was$2.3 million for the three months endedSeptember 30, 2022 compared with$2.6 million for the three months endedSeptember 30, 2021 , a decrease of$0.3 million . The decrease relates to estimated royalty revenue to be received from EA Pharma for elobixibat for the treatment of chronic constipation. Cost of product revenue Three Months Ended September 30, Change 2022 2021 $ (in thousands) Cost of product revenue $ 612 $ 431$ 181 31 Table of Contents Cost of product revenue was$0.6 million for the three months endedSeptember 30, 2022 compared with$0.4 million for the three months endedSeptember 30, 2021 . Following Bylvay approval, certain manufacturing and quality headcount costs are now included in cost of product revenue. There were no material costs, as materials related to current product sold were expensed prior to approval. Bylvay was not approved untilJuly 2021 .
Research and development expenses
Three Months Ended September 30, Change
2022 2021 $
(in thousands)Research and development expenses $ 23,312 $
21,083
Research and development expenses were$23.3 million for the three months endedSeptember 30, 2022 compared with$21.1 million for the three months endedSeptember 30, 2021 , an increase of$2.2 million . The increase in research and development expenses for the 2022 period was principally due to clinical program activities and other costs as we continue to increase our headcount and program activities. The increase in program activities related to Bylvay - PFIC primarily related to clinical costs, regulatory costs and medical affairs and were partially offset by ongoing Phase 3 clinical trials for biliary atresia and Alagille syndrome. The other project costs decreased by$0.5 million primarily due to a decrease in personnel costs primarily related to share-based compensation.
The following table summarizes our principal product development programs and
the out-of-pocket third-party expenses incurred with respect to each
clinical-stage product candidate and our preclinical programs for the three
months ended
Three Months Ended September 30, Change
2022 2021 $
(in thousands)
Direct third-party project costs:
Bylvay - PFIC $ 6,847 $ 3,697 $ 3,150
Bylvay - biliary atresia and ALGS 6,789
7,254 (465)
A3907 1,407 1,423 (16)
Preclinical 949 915 34
Total $ 15,992 $ 13,289 $ 2,703
Other project costs(1):
Personnel costs $ 6,420 $ 7,741 $ (1,321)
Other costs(2) 900 53 847
Total $ 7,320 $ 7,794 $ (474) Total research and development costs $ 23,312
$ 21,083
(1) Other project costs are leveraged across multiple programs.
(2) Other costs include facility, supply, consultant and overhead costs that
support multiple programs.
Selling, general and administrative expenses
Three Months Ended September 30, Change
2022 2021 $
(in thousands)Selling, general and administrative $ 20,564 $
17,612
Selling, general and administrative expenses were$20.6 million for the three months endedSeptember 30, 2022 compared with$17.6 million for the three months endedSeptember 30, 2021 , an increase of$3.0 million . The increase is attributable to personnel and related expenses as we continue to increase our headcount, and commercialization activities related to Bylvay including our sales force and support for global expansion efforts. 32 Table of Contents Other operating expense, net Three Months Ended September 30, Change 2022 2021 $ (in thousands) Other operating expense, net$ 1 $ 3,719$ (3,718)
Other operating expense, net totaled
Gain from sale of priority review voucher, net of transaction costs
Three Months Ended September 30, Change
2022 2021 $
(in thousands)
Gain from sale of priority review voucher, net
of transaction costs $ - $ 103,387 $ (103,387) Gain from sale of priority review voucher, net of transaction costs totaled
Loss on extinguishment of note payable, net of discount
Three Months Ended September 30, Change
2022 2021 $
(in thousands)Loss on extinguishment of note payable, net of discount $
(613) $ -
Loss on extinguishment of note payable, net of discount totaled$0.6 million for the three months endedSeptember 30, 2022 primarily related to the payoff of our Loan and Security Agreement with Hercules. There was no loss on extinguishment of note payable, net of discount for the three months endedSeptember 30, 2021 .
Interest expense, net
Three Months Ended September 30, Change
2022 2021 $
(in thousands)
Interest expense, net $ (2,530) $ (3,331) $ 801
Interest expense, net totaled $2.5 million for the three months ended September
30, 2022 compared with $3.3 million for the three months ended September 30,
2021 . The difference was principally attributable to interest expense associated
with the purchase and sale agreement with Sagard, partially offset by lower
non-cash interest expense recorded in connection with the sale of future
royalties related to sales of elobixibat in Japan , and interest income
associated with our interest bearing cash accounts.
Provision for income taxes
Three Months Ended
September 30, Change
2022 2021 $
In thousands
Provision for income taxes $ -
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We recorded a tax provision of $3.8 million for the three months ended September
30, 2021 , primarily related to the sale of the PRV, offset by a tax benefit from
our ordinary losses. We expect to maintain a full valuation allowance against
the net deferred tax assets for the year. There was no provision for incomes
taxes for the three months ended September 30, 2022 .
Results of Operations for the Nine Months Ended September 30, 2022 and 2021
The following table summarizes our results of operations for the nine months
ended
Nine Months Ended September 30, Change
2022 2021 $
(in thousands)
Revenue
Product revenue, net $ 18,090 $ 1,060 $ 17,030
Royalty revenue 6,780 6,998 (218)
Total revenue 24,870 8,058 16,812
Cost and operating expenses:
Cost of product revenue 1,622 431 1,191
Research and development 68,103 61,920 6,183
Selling, general and administrative 59,019 49,825 9,194
Other operating expense, net 7,544 7,873 (329)
Total cost and operating expenses 136,288 120,049 16,239
Operating loss (111,418) (111,991) 573
Other (loss) income
Gain from sale of priority review voucher, net of transaction costs - 103,387 (103,387)
Loss on extinguishment of note payable, net of discount (613) - (613)
Interest expense, net (8,152) (10,675) 2,523
Net loss before income taxes (120,183) (19,279) (100,904)
Provision for income taxes
- 3,789 (3,789)
Net loss $ (120,183) $ (23,068) $ (97,115)
Revenue
Nine Months Ended September 30, Change
2022 2021 $
(in thousands)
Product revenue, net $ 18,090 $ 1,060 $ 17,030
Royalty revenue 6,780 6,998 (218)
Total revenue $ 24,870 $ 8,058 $ 16,812 Product revenue, net was$18.1 million for the nine months endedSeptember 30, 2022 compared with$1.1 million for the nine months endedSeptember 30, 2021 due to higher Bylvay unit product sales. Product revenue, net for the nine months endedSeptember 30, 2022 was$10.4 million inthe United States and$7.7 million in international markets. Product revenue, net for the nine months endedSeptember 30, 2021 was$0.8 million inthe United States and$0.3 million in International markets. Royalty revenue was$6.8 million for the nine months endedSeptember 30, 2022 compared with$7.0 million for the nine months endedSeptember 30, 2021 , a decrease of$0.2 million . The decrease relates to estimated royalty revenue to be received from EA Pharma for elobixibat for the treatment of chronic constipation. 34 Table of Contents Cost of product revenue Nine Months Ended September 30, Change 2022 2021 $ (in thousands) Cost of product revenue $ 1,622$ 431 $ 1,191 Cost of product revenue was$1.6 million for the nine months endedSeptember 30, 2022 compared with$0.4 million for the nine months endedSeptember 30, 2021 . Following Bylvay approval, certain manufacturing and quality headcount costs are now included in cost of product revenue. There were no material costs, as materials related to current product sold, were expensed prior to approval. Bylvay was not approved untilJuly 2021 .
Research and development expenses
Nine Months Ended September 30, Change
2022 2021 $
(in thousands)
Research and development expenses
Research and development expenses were$68.1 million for the nine months endedSeptember 30, 2022 compared with$61.9 million for the nine months endedSeptember 30, 2021 , an increase of$6.2 million . The increase in research and development expenses for the 2022 period was principally due to clinical and preclinical program activities and other costs as we continue to increase our headcount and program activities. The increase in program activities related to Bylvay - PFIC primarily related to clinical costs, regulatory costs and medical affairs, ongoing Phase 3 clinical trials for biliary atresia and Alagille syndrome and ongoing preclinical trials. The other project costs increased by$1.1 million primarily due other costs offset by a decrease in personnel costs primarily related to share-based compensation.
The following table summarizes our principal product development programs and
the out-of-pocket third-party expenses incurred with respect to each
clinical-stage product candidate and our preclinical programs for the nine
months ended
Nine Months Ended September 30, Change
2022 2021 $
(in thousands)
Direct third-party project costs:
Bylvay - PFIC $ 17,693 $ 15,181 $ 2,512
Bylvay - biliary atresia and ALGS 19,168 18,008
1,160
A3907 5,335 5,241 94
Preclinical 4,203 2,873 1,330
Total $ 46,399 $ 41,303 $ 5,096
Other project costs(1):
Personnel costs $ 19,239 $ 19,668 $ (429)
Other costs(2) 2,465 949 1,516
Total $ 21,704 $ 20,617 $ 1,087 Total research and development costs$ 68,103 $ 61,920
(1) Other project costs are leveraged across multiple programs.
(2) Other costs include facility, supply, consultant and overhead costs that
support multiple programs.
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Selling, general and administrative expenses
Nine Months Ended September 30, Change
2022 2021 $
(in thousands)
Selling, general and administrative
Selling, general and administrative expenses were$59.0 million for the nine months endedSeptember 30, 2022 compared with$49.8 million for the nine months endedSeptember 30, 2021 , an increase of$9.2 million . The increase is attributable to personnel and related expenses as we continue to increase our headcount, and commercialization activities related to Bylvay including our sales force and support for global expansion efforts. Other operating expense, net Nine Months Ended September 30, Change 2022 2021 $ (in thousands) Other operating expense, net $ 7,544 $ 7,873$ (329)
Other operating expense, net totaled
Gain from sale of priority review voucher, net of transaction costs
Nine Months Ended September 30, Change
2022 2021 $
(in thousands)
Gain from sale of priority review voucher, net
of transaction costs $ - $ 103,387 $ (103,387) Gain from sale of priority review voucher, net of transaction costs totaled
Loss on extinguishment of note payable, net of discount
Nine Months Ended September 30, Change
2022 2021 $
(in thousands)Loss on extinguishment of note payable, net of discount $
(613) $ -
Loss on extinguishment of note payable, net of discount totaled$0.6 million for the nine months endedSeptember 30, 2022 primarily related to the payoff of our Loan and Security Agreement with Hercules. There was no loss on extinguishment of note payable, net of discount for the nine months endedSeptember 30, 2021 . 36 Table of Contents Interest expense, net Nine Months Ended September 30, Change 2022 2021 $ (in thousands) Interest expense, net$ (8,152) $ (10,675) $ 2,523 Interest expense, net totaled$8.2 million for the nine months endedSeptember 30, 2022 compared with$10.7 million for the nine months endedSeptember 30, 2021 . The difference was principally attributable to interest expense associated with the purchase and sale agreement with Sagard, partially offset by lower non-cash interest expense recorded in connection with the sale of future royalties related to sales of elobixibat inJapan , and interest income associated with our interest bearing cash accounts.
Provision for income taxes
Nine Months Ended
September 30, Change
2022 2021 $
In thousands
Provision for income taxes $ -
We recorded a tax provision of$3.8 million for the nine months endedSeptember 30, 2021 , primarily related to the sale of the PRV, offset by a tax benefit from our ordinary losses. We expect to maintain a full valuation allowance against the net deferred tax assets for the year. There was no provision for incomes taxes for the nine months endedSeptember 30, 2022 .
Liquidity and Capital Resources
Sources of Liquidity
We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we commercialize Bylvay and continue the development of and seek regulatory approvals for Bylvay in other indications and for our other product candidates. We are subject to all of the risks applicable to the development and commercialization of new pharmaceutical products and may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. We expect that we will need substantial additional funding to complete development of and potentially commercialize our other product candidates. Our operations have historically been financed primarily through issuances of equity or convertible debt, upfront fees paid upon entering into license agreements, payments received upon the achievement of specified milestone events under license agreements, grants and venture debt borrowings, theHealthCare Royalty Partners III, L.P. (HCR) royalty monetization transactions and theSagard Healthcare Partners (Delaware) LP (Sagard) revenue interest transaction. Our primary uses of capital are, and we expect will continue to be, personnel-related costs, third party expenses associated with our research and development programs, including the conduct of clinical trials, and manufacturing-related costs for our other product candidates as well as commercialization and pre-commercialization efforts.
As of
During the first quarter of 2018, following theJapanese Ministry of Health, Labour and Welfare's approval of elobixibat for the treatment of chronic constipation inJanuary 2018 , we received a$44.5 million payment, net of certain transaction expenses, from HCR under our royalty interest acquisition agreement (RIAA). Additionally, this approval triggered a milestone payment to us from EA Pharma of$11.2 million . InJune 2020 , we entered into an 37
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amendment to the RIAA with HCR pursuant to which HCR agreed to pay us an additional$14.8 million , net of certain transaction expenses in exchange for the elimination of the (i)$78.8 million cap amount on HCR's rights to receive royalties on sales inJapan and sales milestones for elobixibat in certain other territories that may become payable by EA Pharma and (ii)$15.0 million payable to us if a specified sales milestone is achieved for elobixibat inJapan . As ofSeptember 30, 2022 , we have received approximately$59.3 million in upfront and milestone payments from EA Pharma under a license agreement for the development and commercialization of elobixibat in specified countries inAsia . We are eligible to receive additional amounts of up to$4.2 million under the amended agreement, if a specified regulatory event is achieved for elobixibat. To the extent we receive future Japanese royalties, sales milestones or other specified payments from EA Pharma, we are obligated to pay those amounts as royalty interest payments to HCR under the RIAA. OnFebruary 25, 2021 , we filed an automatic shelf registration statement on Form S-3 with theSEC , which became effective upon filing, pursuant to which we registered for sale an unlimited amount of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, so long as we continued to satisfy the requirements of a "well-known seasoned issuer" underSEC rules, which we refer to as the 2021 Form S-3. Because we no longer qualified as a well-known seasoned issuer, the 2021 Form S-3 was no longer available for us to offer and sell securities pursuant to the 2021 Form S-3 following the filing of our Annual Report on Form 10-K for the year endedDecember 31, 2021 onMarch 1, 2022 . OnFebruary 25, 2021 , we also entered into a sales agreement with Cowen, which we refer to as the 2021 Sales Agreement, with respect to an at-the-market offering program which provided for us to offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to$100.0 million . Subsequently inJuly 2021 , we sold 7,508 shares of our common stock for net proceeds of approximately$0.2 million pursuant to the 2021 Sales Agreement. The 2021 Sales Agreement was terminated onAugust 15, 2022 in connection with us entering into the 2022 Sales Agreement (as defined below) with Cowen. OnAugust 31, 2021 , we entered into a definitive agreement to sell the rare pediatric disease priority review voucher ("PRV") that we received from the FDA in connection with the approval of the Company's product Bylvay (odevixibat), for cash proceeds of$105.0 million . OnSeptember 28, 2021 , we completed our sale of the PRV and received net proceeds of$103.4 million , after deducting commission costs, which was recorded as a gain from sale of priority review voucher, net of transaction costs. OnAugust 16, 2022 , we filed a new universal shelf registration on Form S-3 with theSEC , which was declared effective onAugust 25, 2022 , pursuant to which we registered for sale up to$400.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, which we refer to as the 2022 Form S-3. The 2022 Form S-3 includes a prospectus covering up to$100.0 million in shares of common stock that can be issued and sold under a new sales agreement we entered into with Cowen onAugust 15, 2022 , which we refer to as the 2022 Sales Agreement, with respect to an at-the-market offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to$100.0 million . Subsequently in the third quarter of 2022, we sold 1,072,310 shares of our common stock for net proceeds of approximately$20.6 million pursuant to the 2022 Sales Agreement. OnSeptember 22, 2022 , we entered into the Purchase Agreement with Sagard for the sale of a revenue interest on sales generated from Bylvay (odevixibat) for an aggregate purchase price of$115.0 million payable upon the closing of the transaction, which occurred onSeptember 22, 2022 . In consideration for the payment of such purchase price, we are obligated to pay to Sagard revenue interest payments on the worldwide annual consolidated net sales of Bylvay, or the Included Product Revenue, at a rate of (A) 12.5% for Included Product Revenue up to and including$250.0 million , (B) 5% for Included Product Revenue in excess of$250.0 million but less than or equal to$350.0 million , and (C) prior to approval of a New Drug Application by the FDA of Bylvay for the treatment of biliary atresia, or the Marketing Approval, 5% for Included Product Revenue in excess of$350.0 million and, from and after Marketing Approval, the rate is decreased to 1% for Included Product Revenue in excess of$350.0 million . These obligations payable to Sagard are capped at$184.0 38
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million which will be increased to$230.0 million if Sagard has not received aggregate payments of$184.0 million byDecember 31, 2028 . In addition, if the aggregate amount of payments received by Sagard as ofDecember 31, 2036 is less than$230.0 million , we have agreed to pay Sagard the difference between the cap and the aggregate amount of all payments received by Sagard as ofDecember 31, 2036 (such difference, the True-Up Payment). In addition, at any time after the closing, we have the right, but not the obligation, or the Call Option, to buy out Sagard's interest in the payments at a repurchase price, or the Put/Call Payment, equal to the difference between (a) a specified amount ranging from$149.5 million up to$230.0 million , based on the period of time between the closing and the exercise of the Call Option, and (b) the aggregate amount of payments that have been received by Sagard. Further, Sagard has the right, but not the obligation, to require us to make the Put/Call Payment at any time during the 180 days following the occurrence of certain specified events, including, but not limited to, a sale or merger of the Company resulting in a change of control, certain uncured material breaches of the Purchase Agreement by the Company, the withdrawal or suspension of marketing approval for Bylvay, or any sale or other disposition of Bylvay by the Company withinthe United States . We also agreed that the Put/Call Payment will be automatically payable upon the occurrence of a bankruptcy event.
Cash Flows
Nine months ended
Nine Months Ended September 30,
2022 2021
(in thousands)
Net cash (used in) provided by:
Operating activities $ (101,431) (93,668)
Investing activities (960) 102,922
Financing activities 127,666 2,389
Total $ 25,275 $ 11,643
Effect of exchange rate changes on cash, cash
equivalents and restricted cash (906) (303)
Net increase in cash, cash equivalents and
restricted cash 24,369 11,340
Operating activities
Cash used in operating activities of$101.4 million during the nine months endedSeptember 30, 2022 was primarily a result of our$120.2 million net loss from operations and a net decrease in assets and liabilities of$8.7 million . The net decrease in operating assets and liabilities during the nine months endedSeptember 30, 2022 was primarily driven by decreases in accrued expenses, inventory, and other current and long-term liabilities, offset by increases in prepaid expenses and other current assets and accounts receivable, net and accounts payable. This decrease was primarily offset by non-cash items, including$10.7 million of share-based compensation expense,$8.3 million of accretion of liability related to sale of future royalties and$7.0 million of foreign currency adjustments. Cash used in operating activities of$93.7 million during the nine months endedSeptember 30, 2021 was primarily a result of our$23.1 million net loss,$103.4 million net gain from the sale of PRV, and a net increase in assets and liabilities of$1.8 million . The net increase in operating assets and liabilities during the nine months endedSeptember 30, 2021 was primarily driven by increases in accrued expenses, accounts payable, accounts receivable, other assets and inventory, offset by decreases in other current and long-term liabilities and prepaid expenses and other current assets. This increase was offset by non-cash items, including$13.3 million of stock-based compensation expense,$9.4 million of accretion of liability related to sale of future royalties, and$7.8 million of foreign currency adjustments.
Investing activities
Cash used in investing activities of$1.0 million during the nine months endedSeptember 30, 2022 was primarily related to purchases of property and equipment. Cash provided by investing activities of$102.9 million during the nine months endedSeptember 30, 2021 was primarily related to net proceeds from the sale of the PRV offset by purchases of property and equipment. 39 Table of Contents Financing activities Cash provided by financing activities of$127.7 million during the nine months endedSeptember 30, 2022 was primarily related to proceeds from the royalty agreement, net of issuance costs of$111.6 million , proceeds of issuance of common stock, net of issuance costs of$20.6 million , proceeds from exercise of options of$6.3 million offset by payment of principal on borrowings of$10.8 million . Cash provided by financing activities of$2.4 million during the nine months endedSeptember 30, 2021 was primarily related to proceeds from the exercise of options.
Funding Requirements
Cash used to fund operating expenses is affected by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
Our future funding requirements will depend on many factors, including the following:
? Future revenue from commercial sales of Bylvay for patients with PFIC;
any unfavorable development or delay in our Bylvay program in ALGS, including
? the submission, review or approval of our Bylvay marketing applications in the
pre-commercialization preparations;
? the costs, design, duration and any potential delays of the pivotal clinical
trial of Bylvay in biliary atresia;
the scope, number, progress, initiation, duration, cost, results and timing of
? clinical trials and nonclinical studies of our current or future product
candidates;
? whether and to what extent milestone events are achieved under our license
agreement with EA Pharma or any potential future licensee or collaborator;
our ability to fulfill our obligations under the Purchase Agreement with
? Sagard, including our ability to make royalty payments and our ability to buy
out Sagard's interest or at Sagard's request, in certain circumstances,
repurchase Sagard's interest in the royalty interest payments;
? the outcomes and timing of regulatory reviews, approvals or other actions;
? our ability to obtain marketing approval for our product candidates;
our ability to establish and maintain additional licensing, collaboration or
? similar arrangements on favorable terms and whether and to what extent we
retain development or commercialization responsibilities under any new
licensing, collaboration or similar arrangement;
? the success of any other business, product or technology that we acquire or in
which we invest;
? our ability to maintain, expand and defend the scope of our intellectual
property portfolio;
? our ability to manufacture any approved products on commercially reasonable
terms;
? our ability to build and maintain a sales and marketing organization or
suitable third-party alternatives for any approved product;
? the number and characteristics of product candidates and programs that we
pursue;
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? the current and potential impacts of the COVID-19 pandemic on our business;
? global economic uncertainty, rising inflation, rising interest rates, market
disruptions and volatility in commodity prices;
? the costs of acquiring, licensing or investing in businesses, product
candidates and technologies;
? our need and ability to hire additional management and scientific and medical
personnel;
the costs to operate as a public company in
? need to implement and maintain financial and reporting systems and other
internal systems and infrastructure for our business;
? market acceptance of our product candidates, to the extent any are approved for
commercial sale; and
? the effect of competing technological and market developments.
We cannot be certain that we will be able to successfully commercialize Bylvay or that we will be able to establish and maintain distribution arrangements. Our failure or the failure of our distributors to successfully commercialize Bylvay could have a material adverse effect on our financial position or results of operations. In addition, we cannot be certain that we will be able to successfully complete our pre-commercialization activities or research and development programs or establish licensing, collaboration or similar arrangements for our product candidates. Our failure or the failure of any current or potential future licensee to complete research and development programs for our product candidates could have a material adverse effect on our financial position or results of operations. We expect to continue to incur losses. Our ability to achieve and maintain profitability is dependent upon the successful development, regulatory approval and commercialization of our products and product candidates and achieving a level of revenues adequate to support our cost structure. We may never achieve profitability. If the conditions for raising capital are favorable, we may seek to finance future cash needs through public or private equity or debt offerings or other financings. Additionally, if we need to raise additional capital to fund our operations, complete clinical trials, or potentially commercialize our product candidates, we may likewise seek to finance future cash needs through public or private equity or debt offerings or other financings. The necessary funding may not be available to us on acceptable terms or at all. We have an effective universal shelf registration on Form S-3 with theSEC pursuant to which we registered for sale up to$400.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, which we refer to as the 2022 Form S-3. The 2022 Form S-3 includes a prospectus covering up to$100.0 million in shares of common stock that can be issued and sold under a new sales agreement we entered into with Cowen onAugust 15, 2022 , which we refer to as the 2022 Sales Agreement, with respect to an at-the-market offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to$100.0 million . Subsequently in the third quarter of 2022, we sold 1,072,310 shares of our common stock for net proceeds of approximately$20.6 million pursuant to the 2022 Sales Agreement. As ofSeptember 30, 2022 , approximately$379.2 million of securities remain available for issuance under the 2022 Form S-3, including up to$79.2 million of our common stock that we may offer and sell, from time to time at our discretion, through Cowen as sales agent under the 2022 Sales Agreement. The sale of additional equity or convertible debt securities may result in significant dilution to our stockholders, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. The incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt may provide for operating and financing covenants that would restrict our operations. We may also seek to finance future cash needs through potential future licensing, collaboration or similar arrangements. These arrangements may not be available on acceptable terms or at all, and we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. 41
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If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our development programs or obtain funds through third-party arrangements that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.
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