The condensed consolidated financial statements and this Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto for the year endedDecember 31, 2021 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 filed with theU.S. Securities and Exchange Commission onMarch 11, 2022 (2021 Annual Report). In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under "Part I. Item 1A. Risk Factors" in our 2021 Annual Report and "Part II. Item 1A. Risk Factors" in this report.
Overview
We are a clinical-stage biotechnology company focused on discovery and development of innovative therapeutics targeting hepatitis B virus (HBV) and other viral diseases.
TheWorld Health Organization (WHO ) estimates that 296 million people worldwide are chronically infected with HBV as of 2019. Our research and development organizations are pursuing multiple drug candidates designed to inhibit the HBV replication cycle and block the generation of covalently closed circular DNA (cccDNA), with the aim of discovering and developing finite and curative therapies for patients with chronic HBV infection. We have discovered several novel core inhibitors, which are small molecules that directly target and allosterically modulate the HBV core protein in a way that affects assembly and stability of HBV nucleocapsids and we are currently advancing an early-stage program evaluating a novel small molecule approach to inhibit entry for HBV and hepatitis delta virus (HDV). HDV is estimated to impact approximately 5% of those chronically infected with HBV, or approximately 12 million people. In addition, our research organization is working on discovering and developing a novel, small molecule interferon-? receptor (IFNAR) agonist designed to selectively activate the interferon-? pathway within the liver and offer the convenience of oral dosing. While we continue our efforts to develop finite and curative therapies for patients with chronic HBV and improved chronic therapy for HDV infection, our research organization is advancing early-stage programs evaluating two additional undisclosed virus targets. These targets, which we currently expect to disclose in the third quarter of 2022, were selected to leverage the deep antiviral expertise and experience of our research and development organizations against diseases with significant unmet medical need. The ongoing COVID-19 pandemic and its broad, global impacts, including supply chain disruptions, have impacted certain aspects of our business, including where and how our employees work in its labs and offices and how and when our nonclinical and clinical studies are conducted. Early in the pandemic, our clinical and nonclinical studies were largely unaffected, but as the pandemic has continued, its impacts have increased. Certain nonclinical animal studies and shipping of compounds necessary for our research programs have each been delayed, and conduct of a clinical study inChina (Study 203), which is currently in the process of being closed, has been impacted by the shutdowns occurring in the first half of 2022 inChina . We rely on contract research organizations (CROs), some of which are inChina andIndia . While these CROs have experienced pandemic-related impacts from time to time. In addition to the Company's CROs inChina andIndia , the Company also contracts with a CRO inUkraine , which shut down operations due toRussia's invasion ofUkraine . Though this CRO has resumed operations, we have reallocated certain work to other global CROs incase it shuts down again. As previously announced, inJanuary 2021 , we wound down our Microbiome program to prioritize and focus our resources on our virology programs. Our Microbiome program had been developing a novel class of oral live microbial biotherapeutics candidates designed to treat disorders associated with the microbiome.
Recent Developments
OnJuly 19, 2022 , our Board of Directors approved a strategic plan (the Plan) to: (1) discontinue development of our first-generation core inhibitor, vebicorvir (VBR), based on review of interim on-treatment efficacy data from on-going triple combination studies that do not support additional clinical studies; (2) advance our next-generation core inhibitors, ABI-H3733 (3733) and ABI-4334 (4334), in clinical studies; and (3) prioritize research activities, including our HBV/HDV entry inhibitor and IFNAR agonist programs, as well as two additional undisclosed viral 17 --------------------------------------------------------------------------------
targets. The Plan included a reduction of our workforce by 30 employees, resulting in a total of approximately 70 remaining employees. Implementation of the Plan is expected to preserve capital while appropriately resourcing the advancement of 3733, 4334 and our novel research pipeline and to optimize manufacturing of all candidates.
Our Primary Focus: Targeting HBV Core Protein to Achieve a Cure
HBV is a DNA virus that infects hepatocytes and establishes a reservoir of cccDNA, a unique viral DNA moiety that resides in the cell nucleus of HBV-infected hepatocytes and is associated with viral persistence and chronic infection. No currently approved oral therapies target cccDNA activity directly, which makes molecules that can modulate cccDNA generation or disrupt its function highly sought in the HBV field. As a result, most of our HBV research and development efforts to date have focused on discovering and developing compounds targeting the core protein, a viral protein involved in numerous aspects of the HBV replication cycle, including the generation of HBV cccDNA. Through our research efforts, we have discovered several chemically distinct series of small molecule core inhibitors that directly target and allosterically inhibit core protein functions.
Vebicorvir
VBR, is licensed fromIndiana University . The conduct of our initial Phase 2 studies, Study 201, 202 and 211, is complete. In Study 201 and 202, VBR administered with NrtI therapy demonstrated a favorable safety profile and led to greater viral suppression of both HBV DNA and viral pgRNA than NrtI therapy alone. However, patientswho stopped therapy in Study 211 did not achieve sustained virologic response as all patients relapsed, meaning they had detectable HBV off therapy, and the dual combination therapy of VBR + NrtI was insufficient to cure chronic HBV infection in the studied population. At theAmerican Association for the Study of Liver Diseases (AASLD) Annual Meeting inNovember 2021 (AASLD 2021), we presented additional follow-up data from Study 211 demonstrating that patients had increases of HBV DNA and pgRNA after discontinuation of VBR despite continued NrtI treatment, further supporting that core inhibitors deepen viral suppression in combination with NrtIs. At the EASL International Liver CongressTM inJune 2022 (EASL 2022), we presented additional VBR data related to the correlation between deeper virologic suppression and fibrosis-4 index in treatment naïve patients with HBeAg positive chronic HBV infection, an evaluation of the drug-drug interaction profile of VBR and an evaluation of the disposition and mass balance recovery of VBR in rats and humans. Based on discussions with leading viral hepatitis experts, global regulatory discussions and feedback, and, with respect to theChina territory, discussions and agreement with our collaboration partner, BeiGene, Ltd. (BeiGene), in early 2021, we decided to not move forward with the global registrational studies for VBR as a chronic suppressive therapy (CST) in combination with NrtI. The decision was made to focus on the greatest unmet medical need of patients, which lies predominantly in cure, rather than CST. As a result, we began to focus our efforts with VBR in combination with NrtI and additional mechanisms targeting finite and curative combination therapy. We currently have three Phase 2 triple combination studies involving VBR ongoing, two of which have been terminated early. These studies are detailed below. See "-Multi-Drug Combination Studies." InJuly 2022 , we announced that we have discontinued further clinical development of VBR based on review of interim on-treatment efficacy from two triple combination studies.
Next Generation Core Inhibitors
In connection with our discontinuation of the development of VBR, we have prioritized clinical development of the next-generation core inhibitors, 3733 and 4334.
ABI-H3733 Our first of two next-generation core inhibitor product candidates, 3733, was internally discovered and developed. The chemical scaffold of 3733 is novel and distinct from each of 4334 and both of our discontinued core inhibitor product candidates, VBR and ABI-H2158 (2158). In 2020, we initiated and completed a Phase 1a clinical study of 3733 to evaluate safety, tolerability and pharmacokinetics (PK) following single ascending dose and multiple ascending dose administration in healthy subjects inNew Zealand . Preliminary data indicate that 3733 was generally well-tolerated and had favorable PK. Results detailing 3733's safety and PK from this study were presented in a poster presentation at AASLD 2021. 18 --------------------------------------------------------------------------------
In
In addition, at EASL 2021, we presented observations on 3733's enhanced potency and target coverage for both antiviral activity and inhibition of cccDNA generation as compared to VBR and 2158. At EASL 2022, we presented 3733's improved PK profile resulting from new formulation activities.
ABI-4334
In mid-2021, we announced the selection of 4334, our other next-generation core inhibitor product candidate. As with all of our core inhibitor product candidates nominated after VBR, 4334 was internally discovered and developed. In addition, the chemical scaffold of 4334 is also novel and distinct from each of VBR, 3733 and 2158. We nominated 4334 based on a preclinical target drug profile that indicates enhanced target coverage and potency to prevent both formation of new virus and cccDNA, which is responsible for maintaining the HBV viral reservoir. We believe that 4334 has a best-in-class preclinical profile, with single-digit nanomolar potency against the production of new virus and the formation of cccDNA. Preclinically to date, 4334 has also demonstrated pan-genotypic activity, an improved resistance profile and a favorable safety profile. Preclinical characterization of 4334 was shared in a poster presentation at AASLD inNovember 2021 . At EASL 2022, we presented preclinical data demonstrating that 4334 promotes formation of empty capsids and prevents cccDNA formation by disrupting incoming capsids. Our preclinical work on 4334 is ongoing, with the aim of completing nonclinical studies to support regulatory filings for clinical studies and initiating a Phase 1a clinical study in the second half of 2022 to evaluate safety, tolerability, and PK following single ascending dose and multiple ascending dose administrations in healthy participants.
ABI-H2158
InSeptember 2021 , we discontinued development of 2158 following the observation of elevated alanine transaminase levels in the Phase 2 clinical study consistent with drug-induced hepatotoxicity.
Multi-Drug Combination Studies
We believe that core inhibitors and NrtI will be central to finite and curative therapies for chronic HBV infection. Therefore, as we have continued to develop and advance our current and future next-generation core inhibitors through clinical studies, we initiated multi-drug combination studies in parallel that add additional drugs (or compounds) with nonoverlapping mechanisms of action to the first-generation core inhibitor + NrtI antiviral backbone. We currently have three ongoing triple combination studies with VBR, two of which have been discontinued early, as described in more detail below. Our first triple combination study, Study 204, is being conducted pursuant to a Clinical Trial Agreement with Arbutus Biopharma Corporation (Arbutus Biopharma) and consists of a randomized, multi-center, open-label Phase 2 clinical study to explore the safety, PK and antiviral activity of the triple combination of VBR, NrtI and AB-729 (Arbutus Biopharma's investigational RNAi candidate) compared to the double combinations of VBR + NrtI and AB-729 + NrtI in virologically suppressed patients. This clinical study initiated in the first quarter of 2021 and completed enrollment inFebruary 2022 . Our second triple combination study, Study 203, was designed to evaluate VBR and NrtI in combination with interferon in treatment-naïve HBeAg positive subjects. This study was also initiated in the first quarter of 2021 and completed enrollment inMarch 2022 . The interim data from Study 204 and Study 203 indicate that the triple combinations do not show a benefit in multiple key viral parameters compared to the dual combinations without VBR in either study and informed our decision to discontinue further development of VBR. We announced the early termination of Study 203 inJuly 2022 . In consultation with Arbutus Biopharma, our two companies intend to continue Study 204 and evaluate the primary endpoints of safety and tolerability of the combination regimen. Our third triple combination study was initiated inApril 2022 pursuant to a Clinical Trial Collaboration Agreement withAntios Therapeutics, Inc. (Antios) to evaluate ATI-2173, Antios's investigational proprietary active site polymerase inhibitor nucleotide (ASPIN), VBR and tenofovir disoproxil fumarate, an NrtI. This multi-center, double-blinded, placebo-controlled study was designed to explore the safety, PK and antiviral activity of this all-oral triple combination. This study, which was expected to enroll ten treatment-naïve or off-treatment HBeAg negative or positive patients in a 12-week treatment study, was initiated inApril 2022 . OnMay 18, 2022 , we were notified by Antios that ATI-2173, Antios'sASPIN , had been placed on clinical hold by the FDA following submission of a 19 --------------------------------------------------------------------------------
safety report involving a patient
Study 204 and Study 203 both experienced enrollment delays due to the ongoing COVID-19 pandemic, and conduct of Study 203 has been impacted by the COVID-related shutdowns occurring in the first half of 2022 inChina . The pandemic has impacted patients and study sites through patient screening delays, travel restrictions and hesitancy to travel to study sites. The pandemic has also impacted our vendors, as our central laboratories have been unable to meet their contractual obligations, and our vendors have experienced staffing constraints and supply chain challenges as they seek to obtain lab kits, reagents and other items necessary to enroll patients in our studies. Enrollment for both of these studies was completed in the first quarter of 2022, and we do not believe these delays will impact the data readouts for the ongoing Study 204. Beyond Core Inhibitors In addition to the development and advancement of our core inhibitor portfolio and our current and future multi-drug combination studies, our research and development team is working on discovering and developing small molecules to inhibit HBV and HDV viral entry and small molecule interferon-? receptor (IFNAR) agonists, to complement our HBV cure strategy.
HBV/HDV Entry Inhibitor
InMarch 2022 , we announced our new research program focused on a novel, orally bioavailable small molecule approach to inhibit entry of HBV and HDV. While HDV is less well known in theU.S. , it is a significant and serious health problem with inadequate treatment in many parts ofEurope ,Africa , theMiddle East ,East Asia and parts ofSouth America . HDV is a "satellite virus," because it can only infect people (1) that are already infected with HBV or (2) at the same time as a person is infected with HBV. HDV is known to accelerate disease progression and increase the incidence of liver cirrhosis and liver cancer, which results in higher morbidity and mortality rates than HBV alone. The current standard of care treatment for HDV off-label pegylated interferon injected weekly or, in some regions, a large, complex molecule that requires daily injections. Our research team has identified a potential opportunity to develop a safe and effective oral small molecule, which could significantly improve convenience and potentially enhance treatment uptake and diagnosis rates. Based on current progress, our research team's aim is to nominate a product candidate for development in the first half of 2023.
IFNAR
InJuly 2022 , we introduced our new research program advancing a novel, small molecule IFNAR agonist designed to selectively activate the interferon-? pathway within the liver and offer the convenience of oral dosing. Interferon-? (IFN-?) is a subcutaneous injectable therapy approved for HBV that has demonstrated functional cure of HBV in some HBV patients, but its poor tolerability profile significantly limits its use. Substantial side effects include flu-like symptoms, cytopenias, serious depression and psychiatric effects. In addition, multiple contraindications limit its use, and it requires weekly injections that result in systemic exposure for up to a year. By focusing exposure on the liver, our investigational IFNAR agonist program aims to engage interferon-?'s validated antiviral and immune modulatory mechanisms, retaining the efficacy of IFN-? while reducing systemic exposure to improve tolerability. cccDNA Disruptors InNovember 2020 , we entered into an exclusive, two-year collaboration and option agreement withDoor Pharmaceuticals, LLC (Door Pharma) focused on the development of a novel class of HBV inhibitors, which we terminated inMay 2022 . The termination will be effectiveSeptember 2022 . Prior to the termination of collaboration with Door Pharma, we worked with Door Pharma on identifying cccDNA disruptors aimed at inhibiting different intra-nuclear steps in the viral replication cycle that complement the activity of our core inhibitors.
We terminated this collaboration to focus resources on our other internal HBV programs and programs targeting other viruses.
Additional Antiviral Opportunities
In addition to our work toward developing finite and curative therapies for patients with chronic HBV infection, our research organization is advancing early-stage programs evaluating two additional undisclosed virus targets. These
20 -------------------------------------------------------------------------------- targets were selected to leverage the deep antiviral expertise and experience of our research and development organizations against diseases with significant unmet medical need.
We expect to disclose more information regarding these discovery programs on additional viral targets in the third quarter of 2022.
Operations
We currently have corporate and administrative offices and research laboratory space inSouth San Francisco, California as well as registrational offices inChina . Since our inception, we have had no revenue from product sales and have funded our operations principally through debt financings prior to our initial public offering in 2010 and through equity financings and collaborations since then. Our operations to date have been primarily limited to organizing and staffing our company, licensing our product candidates, discovering and developing our product candidates, maintaining and improving our patent portfolio and raising capital. We have generated significant losses to date, and we expect to continue to generate losses as we develop our product candidates. As ofJune 30, 2022 , we had an accumulated deficit of$679.0 million . Because we do not generate revenue from any of our product candidates, our losses will continue as we further develop and seek regulatory approval for, and commercialize, our product candidates. As a result, our operating losses are likely to be substantial over the next several years as we continue the development of our product candidates and thereafter if none are approved or successfully launched. We are unable to predict the extent of any future losses or when we will become profitable, if at all. The COVID-19 pandemic resulted in substantially all of ourU.S. -based non-research employees working from their homes beginning inmid-March 2020 . In addition, we took the additional step of requiring all of our employees be fully vaccinated against COVID-19. As government restrictions have relaxed, our employees began returning to the office during the first quarter of 2022. We have adopted a hybrid working model, which allows our employees flexibility regarding when and how frequently to return to the office. There has not been any significant interruption to date of essential activities at our offices, including work in our laboratories with proper protections and procedures in place. While we have experienced some shipping delays or shortages of personal protective equipment (PPE) that are important to maintaining normal workflows in our laboratories, we have been able to continue our critical research activities through schedule shifts, use of PPE on-hand and reallocation of certain resources that allow our employees to practice "social distancing" and comply with applicable laws. Early in the pandemic, our clinical and nonclinical studies were largely unaffected, but as the pandemic has continued, its impacts have increased. Certain nonclinical animal studies and shipping of compounds necessary for our research programs have each been delayed, and conduct of Study 203, which is currently in the process of being closed, has been impacted by the shutdowns occurring in the first half of 2022 inChina . We continually work with our CROs and other vendors to ensure, to the extent possible, that services are provided in a timely manner while also identifying alternative vendors and strategies to utilize in the event that COVID- or third party-related delays threaten our ability to meet our timelines. However, some of our CROs are inChina andIndia , and these CROs have experienced pandemic-related impacts from time to time. We cannot currently predict the specific extent, duration or full impact the COVID-19 pandemic will have on our ongoing and planned research efforts, clinical studies and other business operations. We continue to monitor the situation regularly for additional potential delays, or modifications to our ongoing and planned studies and, if circumstances warrant, we may adjust our budget and operating plan.
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States (U.S. GAAP). 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 evaluate our estimates and judgments, including those related to research and development expense and accruals and stock-based compensation, on an ongoing basis. We base our estimates on 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. 21 -------------------------------------------------------------------------------- Our critical accounting policies and significant estimates are detailed in our 2021 Annual Report. Our critical accounting policies and significant estimates have not changed from those previously disclosed in our 2021 Annual Report.
Results of Operations
Comparison of the Three Months Ended
Research and Development Expense
The following table summarizes the period-over-period changes in our research and development expenses (in thousands, except for percentages):
Three Months Ended June 30, $ Change % Change 2022 2021 2022 vs. 2021 2022 vs. 2021 External expenses: VBR$ 1,385 $ 4,142 $ (2,757 ) (67 %) 2158 264 2,171 (1,907 ) (88 %) 3733 2,259 196 2,063 1053 % 4334 2,143 760 1,383 182 % Research and discovery 2,404 1,551 853 55 % Total external expenses 8,455 8,820 (365 ) (4 %) Employee and contractor-related expenses 8,013 6,506 1,507 23 % Facility and other expenses 1,324 1,423 (99 ) (7 %) Total research and development expenses$ 17,792 $ 16,749 $ 1,043 6 % Research and development expenses were$17.8 million for the three months endedJune 30, 2022 compared to$16.7 million for the same period in 2021. The increase was primarily driven by external expenses generated from the advancement of 3733, 4334 and our research discovery program. In addition, employee and contractor-related expenses increased by$1.5 million primarily due to increases in salary and benefits as well as accrued severance benefits related to an executive officer associated with the reorganization announced inJuly 2022 . These increases were partially offset by a decrease in VBR's external expenses due to the termination of Studies 211 and 205 as well as costs under two of our Phase 2 triple combination studies being shared with collaboration partners. The remaining offset relates to a decrease in 2158's external expenses due to the termination of the program.
General and Administrative Expense
The following table summarizes the period-over-period changes in our general and administrative expenses (in thousands, except for percentages):
Three Months Ended June 30, $ Change % Change 2022 2021
2022 vs. 2021 2022 vs. 2021
General and administrative expenses
(2 %) General and administrative expense consists primarily of salaries, consulting fees and other related costs, professional fees for legal services, accounting and tax services, insurance and travel expenses, as well as stock-based compensation expense associated with equity awards to our employees and directors. General and administrative expenses were comparable with$6.8 million during the three months endedJune 30, 2022 and$6.9 million for the same period in 2021. The impact to salaries and benefits associated with the termination of an executive officer as part of the reorganization announced inJuly 2022 was offset by a reduction in salaries and benefits due to employee turnover. 22 --------------------------------------------------------------------------------
Comparison of the Six Months Ended
Research and Development Expense
The following table summarizes the period-over-period changes in our research and development expenses (in thousands, except for percentages):
Six Months Ended June 30, $ Change % Change 2022 2021 2022 vs. 2021 2022 vs. 2021 External expenses: VBR$ 3,306 $ 9,710 $ (6,404 ) (66 %) 2158 1,165 4,557 (3,392 ) (74 %) 3733 3,454 604 2,850 472 % 4334 3,400 1,318 2,082 158 % Microbiome - 488 (488 ) (100 %) Research and discovery 4,491 2,699 1,792 66 % Total external expenses 15,816 19,376 (3,560 ) (18 %) Employee and contractor-related expenses 16,198 11,402 4,796 42 % Facility and other expenses 2,983 4,525 (1,542 ) (34 %) Total research and development expenses$ 34,997 $ 35,303 $ (306 ) (1 %) Research and development expenses were$35.0 million for the six months endedJune 30, 2022 compared to$35.3 million for the same period in 2021. Decreases in external expenses of$3.6 million and facility and other expenses of$1.5 million were materially offset by increases in employee and contractor-related expenses of$4.8 million . The decrease in external expenses was due to the termination of Studies 211 and 205, the termination of the 2158 and the Microbiome program as well as cost savings from sharing costs with our collaboration partners under two of our Phase 2 triple combination studies with VBR. This was partially offset by external expenses generated from the advancement of 3733, 4334 and our research discovery program. The decrease in facility and other expenses of$1.5 million was primarily attributable to asset impairment and other charges incurred in connection with the wind-down of the Microbiome program announced inJanuary 2021 . The increase in employee and contractor-related expenses of$4.8 million was primarily due to the reversal of$4.1 million of previously recognized stock-based compensation expense related to forfeited awards of terminated employees during the six months endedJune 30, 2021 , of which$2.7 million resulted from the wind-down of our Microbiome program, as well as increases in salaries and benefits primarily due to accrued severance benefits to an executive officer associated with the reorganization announced inJuly 2022 .
General and Administrative Expense
The following table summarizes the period-over-period changes in our general and administrative expenses (in thousands, except for percentages):
Six Months Ended June 30, $ Change % Change 2022 2021
2022 vs. 2021 2022 vs. 2021
General and administrative expenses
(18 %) General and administrative expenses were$12.7 million for the six months endedJune 30, 2022 compared to$15.6 million for the same period in 2021. The decrease in general and administrative expenses primarily relates to a decrease in stock-based compensation expense of$1.4 million due to a decrease in the grant date fair value of recent option grants. We also experienced decreases of$0.6 million in facility-related expenses primarily due to termination of lease agreements related to the wind-down of the Microbiome program in 2021,$0.5 million in professional fees primarily due to decreases in legal expenses and$0.4 million in recruitment expenses due to hiring of fewer employees during six months endedJune 30, 2022 compared to the same period in 2021. The impact to salaries and benefits associated with the termination of an executive officer as part of the reorganization announced inJuly 2022 was offset by a reduction in salaries and benefits due to employee turnover. 23 --------------------------------------------------------------------------------
Liquidity and Capital Resources
Sources of Liquidity
As a result of our significant research and development expenditures and the lack of any FDA-approved products to generate product sales revenue, we have not been profitable and have generated operating losses since we were incorporated inOctober 2005 . We have funded our operations throughJune 30, 2022 principally through equity financings, raising an aggregate of$604.6 million in net proceeds, and strategic collaborations, raising an aggregate of$90.0 million through upfront payments.
Cash Flows for the Six Months Ended
The following table summarizes our cash flow activities (in thousands):
Six Months Ended June 30, Cash (used in) provided by: 2022 2021 Operating activities$ (45,387 ) $ (55,152 ) Investing activities 42,646 14,929 Financing activities 177 40,296
Net cash used in operating activities was$45.4 million for the six months endedJune 30, 2022 . This was primarily due to our$47.6 million net loss, adjusted for$3.0 million recognized for stock-based compensation expense. Net cash used in operating activities was$55.2 million for the six months endedJune 30, 2021 . This was primarily due to our$50.8 million net loss and a decrease of$7.6 million in other accrued expenses due to payment of our 2020 annual bonuses and accrued severances associated with the wind-down of our Microbiome program. These were partially offset by a$1.6 million loss on disposal of property and equipment associated with the wind-down of our Microbiome program during the six months endedJune 30, 2021 .
Net cash provided by investing activities for the six months ended
Net cash provided by investing activities for the six months endedJune 30, 2021 was$14.9 million . This was due to proceeds of$17.2 million from sales and maturities of marketable securities, net of purchases, offset by our purchase of leased equipment for$3.1 million that we then sold for$0.9 million in connection with the wind-down of the Microbiome program.
Cash flows from financing activities were not significant for the six months
ended
Net cash provided by financing activities for the six months ended
Funding Requirements
We will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. We monitor our cash needs and the status of the capital markets on a continuous basis. From time to time, we opportunistically raise capital and have done so numerous times since our initial public offering by issuing equity securities, most recently inNovember 2021 . We expect to continue to raise capital when and as needed and at the time and in the manner most advantageous to us. 24 -------------------------------------------------------------------------------- We expect that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements for at least the next twelve months. There were no material changes in our commitments under the contractual obligations disclosed in our 2021 Annual Report. Since our inception, we have not engaged in any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
Our future capital requirements will depend on many factors, including:
• our ability to successfully execute our Plan, including reducing the size
of our organization to align with the Plan;
• the scope, progress, results and costs of our ongoing drug discovery,
nonclinical development, laboratory testing and clinical studies of our
product candidates and any additional clinical studies we may conduct in
the future;
• the extent to which we further acquire or in-license other product
candidates and technologies; • our ability to manufacture, and to contract with third parties to
manufacture, adequate supplies of our product candidates for our clinical
studies and any eventual commercialization;
• the costs, timing and outcome of regulatory review of our product candidates;
• the costs of preparing, filing and prosecuting patent applications in the
property rights and defending intellectual property-related claims; and • our ability to establish and maintain collaborations on favorable terms,
if at all.
Identifying potential product candidates and conducting nonclinical testing and clinical studies is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will likely be derived from sales of medicines that we do not expect to be commercially available for years, if at all. Accordingly, we will need to continue to rely on additional financings to achieve our business objectives. Adequate additional financings may not be available to us on acceptable terms, or at all. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, 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. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. 25
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