CEREVEL THERAPEUTICS : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed consolidated
financial statements and notes thereto included elsewhere in this Quarterly
Report, and the consolidated financial statements and accompanying notes, as
well as Management's Discussion and Analysis of Financial Condition and Results
of Operations contained in our Annual Report on Form 10-K for the year ended
December 31, 2020. Certain of the information contained in this discussion and
analysis or set forth elsewhere in this Quarterly Report, including information
with respect to plans and strategy for our business, includes forward-looking
statements that involve risks and uncertainties. As a result of many factors,
including those factors set forth in the section entitled "Risk Factors," our
actual results could differ materially from the results described in or implied
by the forward-looking statements contained in the following discussion and
analysis. You should carefully read the section entitled "Risk Factors" to gain
an understanding of the material and other risks that could cause actual results
to differ materially from our forward-looking statements. Please also see the
section entitled "Cautionary Note Regarding Forward-Looking Statements."

Overview

Introduction

We are a clinical-stage biopharmaceutical company pursuing a targeted approach
to neuroscience that combines a deep understanding of disease-related biology
and neurocircuitry of the brain with advanced chemistry and central nervous
system, or CNS, target receptor selective pharmacology to discover and design
new therapies. We seek to transform the lives of patients through the
development of new therapies for neuroscience diseases, including schizophrenia,
epilepsy and Parkinson's disease. Our "ready-made" pipeline of 11 small molecule
programs, which includes five clinical-stage product candidates, was developed
through over a decade of research and investment by Pfizer Inc., or Pfizer, and
was supported by an initial capital commitment from an affiliate of Bain Capital
and a keystone equity position from Pfizer. We are advancing our extensive and
diverse pipeline with numerous clinical trials underway, including three Phase 3
trials and an open-label safety extension trial for tavapadon in Parkinson's as
well as a Phase 2 trial in focal epilepsy and a Phase 1 trial in acute anxiety
for darigabat. In addition, we recently announced positive topline results for
CVL-231 in our Phase 1b trial in schizophrenia. See "-Our Pipeline" below. We
have built a highly experienced team of senior leaders and neuroscience drug
developers who combine a nimble, results-driven biotech mindset with the proven
expertise of large pharmaceutical company experience and capabilities in drug
discovery and development.

Our portfolio of product candidates is based on a differentiated understanding
of the neurocircuitry of CNS diseases, as well as the key pillars of our
targeted approach to neuroscience: (i) receptor-drug interactions at the atomic
level to achieve targeted receptor subtype selectivity, (ii) orthosteric and
allosteric chemistry to achieve ideal receptor pharmacology and (iii) robust
packages of preclinical and clinical data that elucidate the key points of
differentiation for our compounds. Our rational design approach uses measured
and calculated structural and surface charge information from the target protein
combined with high-resolution crystallography data, computational homology
models, screening of single-residue mutant proteins, indirect solution-phase
imaging techniques and other biophysical measurements to glean key
molecular-level information about the interaction between a target protein and
our product candidates. These insights then drive structure-informed design of
subsequent molecules. Due to our understanding of the specificity and dynamic
range of neural networks and how to modulate them, we believe that our product
candidates have the potential to achieve optimal therapeutic activity while
minimizing unintended side effects of currently available therapies.

Key Pipeline and Business Developments

July 2021 Public Offering

On July 7, 2021, we completed a follow-on public offering of our common stock
pursuant to which we issued and sold 14,000,000 shares of our common stock at a
price to the public of $25.00 per share. The aggregate net proceeds from this
offering totaled approximately $328.2 million, after deducting underwriting
discounts and commissions of $21.0 million and offering expenses of
approximately $0.8 million.

CVL-231 Positive Phase 1b Data

On June 29, 2021, we announced positive topline results for CVL-231 in our Phase
1b clinical trial in schizophrenia. Both doses of CVL-231 demonstrated a
clinically meaningful and statistically significant improvement in Positive and
Negative Syndrome Scale, or PANSS, total score at six weeks and were generally
well-tolerated compared with placebo.

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Funding Agreements

On April 12, 2021, we entered into funding agreements, or the Funding
Agreements, with NovaQuest Co-Investment Fund XVI, L.P., or NovaQuest, and BC
Pinnacle Holdings, LP, or Bain, pursuant to which NovaQuest and Bain will
provide up to $125.0 million, or the Total Funding Commitment, to support our
development of tavapadon for the treatment of Parkinson's disease over four
years, of which approximately $31.1 million (25% of the Total Funding
Commitment, net of $0.2 million of fees incurred by Bain and NovaQuest) was
received in April 2021.

For additional information on our funding agreements, please read Note 5, Financing Liabilities, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Our Pipeline

The following table summarizes our current portfolio of product candidates. This table does not include two additional preclinical programs with disease-modifying potential that have not yet been disclosed.

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Below are our five most advanced product candidates:

1.

CVL-231 is a positive allosteric modulator, or PAM, that selectively targets the
muscarinic acetylcholine 4 receptor subtype, or M4. We conducted a Phase 1b
trial of CVL-231 in schizophrenia, consisting of Part A, a multiple ascending
dose, or MAD, study and Part B, a pharmacodynamic, or PD, assessment. In June
2021, we announced positive topline results for the Phase 1b trial. Both doses
of CVL-231 demonstrated a clinically meaningful and statistically significant
improvement in PANSS total score at six weeks and were generally well-tolerated
compared with placebo. We plan to rapidly advance CVL-231 with a comprehensive
Phase 2 development program for schizophrenia and to evaluate the potential of
this mechanism in other populations, including dementia-related psychosis.
2.
Darigabat (formerly known as CVL-865) is a PAM that selectively targets the
alpha-2/3/5 subunits of the GABAA receptor. In the second half of 2020, we
initiated a Phase 2 proof-of-concept trial, known as REALIZE, in patients with
drug-resistant focal onset seizures in epilepsy, or focal epilepsy. Data is
expected in the second half of 2022 for the Phase 2 focal epilepsy trial. We are
also conducting a Phase 1 proof-of-principle trial of darigabat in acute
anxiety. The Phase 1 acute anxiety trial is being conducted at the Centre for
Human Drug Research, a single specialized site in the Netherlands. In July 2021,
Dutch government authorities reimposed restrictions due to the ongoing COVID-19
pandemic, now driven primarily by Delta variant cases in

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3.

young unvaccinated adults following relaxation measures that ended in June 2021.
We will continue to closely monitor the rapidly evolving regulatory landscape in
the Netherlands and its impact on the clinical trial timeline. While this trial
remains ongoing and actively recruiting, as a result of recent COVID-19 guidance
by the Dutch authorities, data for the acute anxiety trial are now expected in
the first half of 2022.
3.
Tavapadon is a selective dopamine D1/D5 partial agonist that we are developing
for the treatment of early- and late-stage Parkinson's disease. We initiated a
registration-directed Phase 3 program for tavapadon beginning in January 2020,
which includes two trials in early-stage Parkinson's, known as TEMPO-1 and
TEMPO-2, one trial in late-stage Parkinson's, known as TEMPO-3, and an
open-label safety extension trial, known as TEMPO-4. We expect initial data from
our Phase 3 program to be available beginning in the first half of 2023.
4.
CVL-871 is a selective dopamine D1/D5 partial agonist specifically designed to
achieve a modest level of partial agonism, which we believe may be useful in
modulating the complex neural networks that govern cognition, motivation and
apathy behaviors in neurodegenerative diseases. In the second quarter of 2021,
the U.S. Food and Drug Administration, or FDA, granted Fast Track Designation
for CVL-871 for the treatment of dementia-related apathy. We initiated screening
in a Phase 2a exploratory trial in dementia-related apathy, with data expected
in the second half of 2022.
5.
CVL-936 is a selective dopamine D3-preferring antagonist that we are developing
for the treatment of substance use disorder, or SUD. We have received a notice
of award for cooperative grant funding from the National Institute on Drug
Abuse, or NIDA, to support the development of this compound in opioid use
disorder, or OUD. We initiated a Phase 1 single ascending dose, or SAD, trial in
January 2020. We concluded dosing of Cohort 1 of the Phase 1 SAD trial after
receiving sufficient clinical data for the intended purposes for this trial. We
intend to conduct a multiple dose non-clinical safety pharmacology study before
additional Phase 1 SAD and MAD evaluations.

We believe that all five of our most advanced product candidates have target
product profiles that may enable them to become backbone therapies in their
respective lead indications, either replacing standards of care as monotherapies
or enhancing treatment regimens as adjunct to existing therapies. Results from
the clinical trials mentioned above will guide the potential development of our
product candidates in additional indications with similar neurocircuitry
deficits.

We plan to advance the development of the remainder of our broad portfolio
across multiple neuroscience indications, including CVL-354, our selective kappa
opioid receptor antagonist, which we refer to as KORA, that we are developing in
major depressive disorder, or MDD, and SUD. We submitted an Investigational New
Drug, or IND, for CVL-354 in the second quarter of 2021 and expect to initiate a
Phase 1 SAD and MAD trial in the third quarter of 2021. We are also developing
CVL-047, our selective PDE4 inhibitor that spares the PDE4D subtype, for the
treatment of MDD and schizophrenia, and we plan to submit an IND in the fourth
quarter of 2021. We are also deploying the latest technologies, such as
artificial intelligence and DNA-encoded chemical libraries, to efficiently
identify new therapeutic molecules, including those with disease-modifying
potential. We believe that our targeted approach to neuroscience will enable us
to create a leading drug discovery and development platform to transform the
lives of patients living with neuroscience diseases.

Behind our portfolio stands a team with a multi-decade track record of drug
approvals and commercial success. This track record has been driven by their
extensive experience with empirically-driven clinical trial design and
implementation, a history of successful interactions with regulatory agencies
and relationships with global key opinion leaders. We believe that the
distinctive combination of our management team and our existing pipeline has the
potential to bring to patients the next generation of transformative
neuroscience therapies.

Business Environment

The biopharmaceutical industry is extremely competitive. We are subject to risks
and uncertainties common to clinical-stage companies in the biopharmaceutical
industry. These risks include, but are not limited to, the introduction of new
products, therapies, standards of care or technological innovations, our ability
to obtain and maintain adequate protection for our licensed technology, data or
other intellectual property and proprietary rights and compliance with extensive
government regulation and oversight. We are also dependent upon the services of
key personnel, including our Chief Executive Officer, executive team and other
highly skilled employees. Demand for experienced personnel in the pharmaceutical
and biotechnology industries is high and competition for talent is intense.
Please read the section entitled "Risk Factors" for additional information.

We face potential competition from many different sources, including
pharmaceutical and biotechnology companies, academic institutions and
governmental agencies as well as public and private research institutions. Many
of our competitors are working to develop or have commercialized products
similar to those we are developing and have considerable experience in
undertaking clinical trials and in obtaining regulatory approval to market
pharmaceutical products. Our competitors may also have significantly greater
financial resources, established presence in the market, expertise in research
and development, manufacturing, preclinical and clinical testing, obtaining
regulatory approvals and reimbursement and marketing approved products. Other
smaller or early-stage companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established
companies. These third parties also compete with us in recruiting and retaining
qualified scientific and management personnel, establishing

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clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Risks and Liquidity

Product development is very expensive and involves a high degree of risk. Only a
small number of research and development programs result in the
commercialization of a product. We will not generate revenue from product sales
unless and until we successfully complete clinical development, are able to
obtain regulatory approval for and successfully commercialize the product
candidates we are developing or may develop. We currently do not have any
product candidates approved for commercial sale. In addition, we operate in an
environment of rapid change in technology. We are also dependent upon the
services of our employees, consultants, third-party CROs, CMOs and other
third-party organizations.

Our product candidates, currently under development or that we may develop, will
require significant additional research and development efforts, including
extensive clinical testing and regulatory approval prior to commercialization.
These efforts require significant amounts of additional capital, adequate
personnel infrastructure and extensive compliance and reporting capabilities.
There can be no assurance that our research and development activities will be
successfully completed, that adequate protection for our licensed or developed
technology will be obtained and maintained, that products developed will obtain
necessary regulatory approval or that any approved products will be commercially
viable.

Until such time, if ever, as we can generate substantial product revenue, we
will need substantial additional funding to support our continuing operations
and pursue our growth strategy, and we may finance our operations through a
combination of additional private or public equity offerings, debt financings,
collaborations, strategic alliances, marketing, distribution or licensing
arrangements with third parties or through other sources of financing. To the
extent that we raise additional capital through the sale of private or public
equity or convertible debt securities, your ownership interest will be diluted,
and the terms of these securities may include liquidation or other preferences
that adversely affect your rights as a common stockholder. Debt financing and
preferred equity financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making acquisitions or capital expenditures or
declaring dividends. If we raise additional funds through collaborations,
strategic alliances or marketing, distribution or licensing arrangements with
third parties, we may have to relinquish valuable rights to our technologies,
future revenue streams, research programs or drug candidates, or grant licenses
on terms that may not be favorable to us. If we are unable to raise additional
funds through equity or debt financings or other arrangements when needed, we
may be required to delay, limit, reduce or terminate our research, product
development or future commercialization efforts, grant rights to develop and
market product candidates that we would otherwise prefer to develop and market
ourselves, obtain funds through arrangement with collaborators on terms
unfavorable to us or pursue merger or acquisition strategies, all of which could
adversely affect the holdings or the rights of our stockholders.

We have incurred significant operating losses since our inception and, as of
June 30, 2021, we had an accumulated deficit of $495.1 million and had not yet
generated revenues. We believe that our available cash resources as of June 30,
2021, of $327.1 million, will enable us to fund our operating expense and
capital expenditure requirements through at least twelve months from the
issuance date of the unaudited condensed consolidated financial statements
included in this Quarterly Report.

We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

?
advance our clinical-stage product candidates CVL-231, darigabat, tavapadon,
CVL-871 and CVL-936 through clinical development, including as we advance these
candidates into later-stage clinical trials;
?
advance our preclinical stage product candidates into clinical development
including CVL-354 and CVL-047;
?
seek to identify, acquire and develop additional product candidates, including
through business development efforts to invest in or in-license other
technologies or product candidates;
?
hire additional clinical, quality control, medical, scientific and other
technical personnel to support our clinical operations;
?
expand our operational, financial and management systems and increase personnel
to support our operations;
?
meet the requirements and demands of being a public company;
?
maintain, expand and protect our intellectual property portfolio;
?
make milestone, royalty or other payments due under the Pfizer License Agreement
and any future in-license or collaboration agreements;
?
seek regulatory approvals for any product candidates that successfully complete
clinical trials; and
?
undertake any pre-commercialization activities to establish sales, marketing and
distribution capabilities for any product candidates for which we may receive
regulatory approval in regions where we choose to commercialize our products on
our own or jointly with third parties.

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Business Combination Transaction

On October 27, 2020, ARYA Sciences Acquisition Corp II, or ARYA, completed the
acquisition of Cerevel Therapeutics, Inc., or Old Cerevel, a private company,
pursuant to the Business Combination Agreement dated July 29, 2020, as amended
on October 2, 2020, or the Business Combination Agreement. ARYA was incorporated
as a Cayman Islands exempted company on February 20, 2020 and was formed for the
purpose of effecting a merger, share exchange, asset acquisition, share
purchase, reorganization or similar business combination with one or more
businesses. Cerevel Therapeutics, Inc. was incorporated in Delaware on July 23,
2018 under the name Perception Holdco, Inc., which was subsequently changed to
Cerevel Therapeutics, Inc. on October 23, 2018.

Upon the closing of the transactions contemplated by the Business Combination
Agreement, which we refer to as the Business Combination or the Business
Combination Transaction, Old Cerevel became a wholly owned subsidiary of ARYA
and ARYA was renamed Cerevel Therapeutics Holdings, Inc. Upon completion of the
Business Combination Transaction, and pursuant to the terms of the Business
Combination Agreement, the existing shareholders of Old Cerevel exchanged their
interests for shares of common stock of Cerevel Therapeutics Holdings, Inc., or
New Cerevel.

We accounted for the Business Combination Transaction as a reverse
recapitalization, which is the equivalent of Old Cerevel issuing stock for the
net assets of ARYA, with ARYA treated as the acquired company for accounting
purposes. The net assets of ARYA were stated at historical cost with no goodwill
or other intangible assets recorded. Reported results from operations included
herein prior to the Business Combination are those of Old Cerevel. The shares
and corresponding capital amounts and loss per share related to Old Cerevel's
outstanding redeemable convertible preferred stock, redeemable convertible
common stock, and common stock prior to the Business Combination Transaction
have been retroactively restated to reflect the exchange ratio established in
the Business Combination Agreement (1.00 share of Old Cerevel for 2.854 shares
of New Cerevel), or the Exchange Ratio.

For additional information on our operations, please read Note 1, Nature of
Operations, to our audited consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2020, or our Annual
Report. For additional information on the Business Combination Transaction,
please read Note 3, Business Combination, to our audited consolidated financial
statements included in our Annual Report.

Pfizer License Agreement

In August 2018 we entered into a license agreement with Pfizer, or the Pfizer
License Agreement, pursuant to which we were granted an exclusive,
sublicensable, worldwide license under certain Pfizer patent rights, and a
non-exclusive, sublicensable, worldwide license under certain Pfizer know-how to
develop, manufacture and commercialize certain compounds and products, which
currently constitute the entirety of our asset portfolio, in the field of
treatment, prevention, diagnosis, control and maintenance of all diseases and
disorders in humans, subject to the terms and conditions of the Pfizer License
Agreement.

Under the Pfizer License Agreement, we are solely responsible for the
development, manufacture, regulatory approval and commercialization of compounds
and products in the field and we will pay Pfizer tiered royalties on the
aggregate net sales during each calendar year, determined on a
product-by-product basis, with respect to products under the Pfizer License
Agreement, and we may pay potential milestone payments to Pfizer, based on the
successful achievement of certain regulatory and commercial milestones. To date,
no regulatory or commercial approval milestone payments or royalty payments were
made or became due under this agreement.

For additional information on our Pfizer License Agreement, please read Note 6, Pfizer License Agreement, to our audited consolidated financial statements included in our Annual Report.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the COVID-19 outbreak a
pandemic. The COVID-19 pandemic is evolving, and to date has led to the
implementation of various responses, including government-imposed quarantines,
travel restrictions and other public health safety measures.

We are closely monitoring the impact of the pandemic of COVID-19 on all aspects
of our business, including how it has impacted and may continue to impact our
operations and the operations of our suppliers, vendors and business partners.
We have taken steps to identify and mitigate the adverse impacts on, and risks
to, our business posed by its spread and actions taken by governmental and
health authorities to address this pandemic; however, the spread of COVID-19 has
caused us to modify our business practices, including implementing a temporary
work-from-home policy for all employees who are able to perform their duties
remotely and temporarily restricting all non-essential travel and discouraging
employee attendance at industry events and in-person work-related meetings. We
expect to continue to take actions as may be required or recommended by
government authorities or as we determine are in the best interests of our
employees and other business partners in light of COVID-19.

More specifically, the onset of the COVID-19 pandemic caused brief pauses in
patient screening and enrollment in our Phase 3 trials of tavapadon for the
treatment of Parkinson's (which we subsequently resumed in the second half of
2020), and we remain particularly vigilant about patient safety given the
elderly nature of this population. In addition, our Phase 1 trial of darigabat
in acute

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anxiety is being conducted at the Centre for Human Drug Research, a single
specialized site in the Netherlands. In July 2021, Dutch government authorities
reimposed restrictions due to the ongoing COVID-19 pandemic, now driven
primarily by Delta variant cases in young unvaccinated adults following
relaxation measures that ended in June 2021. We will continue to closely monitor
the rapidly evolving regulatory landscape in the Netherlands and its impact on
the clinical trial timeline. While this trial remains ongoing and actively
recruiting, as a result of recent COVID-19 guidance by the Dutch authorities,
data for the acute anxiety trial are now expected in the first half of 2022.

While we have taken measures to revise clinical trial protocols, the extent to
which COVID-19 impacts our business, results of operations and financial
condition will depend on future developments, which, despite progress in
vaccination efforts, are highly uncertain and cannot be predicted with
confidence, including the duration of the outbreak, new information that may
emerge concerning the severity of COVID-19, such as new strains of the virus,
including the Delta variant, which may impact rates of infection and vaccination
efforts, developments or perceptions regarding the safety of vaccines and the
effectiveness of any additional preventative and protective actions to contain
COVID-19 or treat its impact, including vaccination campaigns, among others.

In addition, recurrences or additional waves of COVID-19 cases could cause other
widespread or more severe impacts depending on where infection rates are
highest. We cannot presently predict the scope and severity of any potential
business shutdowns or disruptions, but if we or any of the third parties with
whom we engage were to experience prolonged business shutdowns or other
disruptions, our ability to conduct our business in the manner and on the
timelines presently planned could be materially and negatively affected, which
could have a material adverse impact on our business, results of operations and
financial condition. The estimates of the impact on our business may change
based on new information that may emerge concerning COVID-19 and the actions to
contain it or treat its impact and the economic impact on local, regional,
national and international markets.

We have not incurred any significant impairment losses in the carrying values of our assets as a result of the pandemic and we are not aware of any specific related event or circumstance that would require us to revise our estimates reflected in our audited consolidated financial statements.

Components of Operating Results

Revenues

We have not generated any revenues since our inception and do not expect to
generate any revenues from the sale of products in the near future, if at all.
If our development efforts for our current product candidates or additional
product candidates that we may develop in the future are successful and can be
commercialized, we may generate revenue in the future from product sales.
Additionally, we may enter into collaboration and license agreements from time
to time that provide for certain payments due to us. Accordingly, we may
generate revenue from payments from such collaboration or license agreements in
the future.

Research and Development

We support our drug discovery and development efforts through the commitment of
significant resources to our preclinical and clinical development activities.
Our research and development expense includes:

?
employee-related expenses, consisting of salaries, benefits and equity-based
compensation for personnel engaged in our research and development activities;
?
expenses incurred in connection with the preclinical and clinical development of
our product candidates, including costs incurred under agreements with clinical
research organizations, or CROs, investigative clinical trial sites and
consultants and other third-party organizations that conduct research and
development activities on our behalf;
?
costs associated with preclinical studies and clinical trials, including
research materials;
?
materials and supply costs associated with the manufacture of drug substance and
drug product for preclinical testing and clinical trials;
?
costs related to regulatory compliance requirements; and
?
certain indirect costs incurred in support of overall research and development
activities, including facilities, depreciation and technology expenses.

We expense research and development expenses as incurred. Payments we make for
research and development services prior to the services being rendered are
recorded as prepaid assets in our consolidated balance sheets and are expensed
as the services are provided. We estimate and accrue the value of goods and
services received from CROs, CMOs and other third parties each reporting period
based on estimates of the level of services performed and progress in the period
when we have not received an invoice from such organizations. When evaluating
the adequacy of accrued liabilities, we analyze progress of the studies or
clinical trials, including the phase of completion of events, invoices received
and contracted costs. We reassess and adjust our accruals as actual costs become

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known or as additional information becomes available. Our historical accrued estimates have not been materially different from actual costs.

Our external research and development expenses for our clinical stage product
candidates are tracked on a program-by-program basis and consist primarily of
fees, reimbursed materials and other costs paid to consultants, contractors,
CROs and CMOs. External research and developments costs that directly support
our discovery activities and preclinical programs are classified within other
research and development programs. Program costs for the periods presented do
not reflect an allocation of expenses associated with personnel costs,
equity-based compensation expense, activities that benefit multiple programs or
indirect costs incurred in support of overall research and development, such as
technology and facilities-related costs.

We expect that our research and development expenses will increase substantially
in connection with our planned preclinical and clinical development activities
both in the near-term and beyond as we continue to invest in activities to
develop our product candidates and preclinical programs and as certain product
candidates advance into later stages of development. Product candidates in later
stages of clinical development generally have higher development costs than
those in earlier stages of clinical development, primarily due to the increased
size, scope and duration of later-stage clinical trials. Furthermore, the
process of conducting the necessary clinical trials to obtain regulatory
approval is costly and time-consuming, and the successful development of our
product candidates is highly uncertain. As a result, we cannot accurately
estimate or know the nature, timing and costs that will be necessary to complete
the preclinical and clinical development for any of our product candidates or
when and to what extent we may generate revenue from the commercialization and
sale of any of our product candidates or achieve profitability.

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include:

?
per patient trial costs;
?
the number of patients that participate in the trials;
?
the number of sites included in the trials;
?
the countries in which the trials are conducted;
?
the length of time required to enroll eligible patients;
?
the number of doses that patients receive;
?
the drop-out or discontinuation rates of patients;
?
potential additional safety monitoring or other studies requested by regulatory
agencies;
?
the duration of patient follow-up; and
?
the efficacy and safety profile of our product candidates.

Changes in any of these assumptions could significantly impact the cost and
timing associated with the development of our product candidates. Additionally,
future competition and commercial and regulatory factors beyond our control may
also impact our clinical development programs and plans.

General and Administrative

We expense general and administrative costs as incurred. General and
administrative expenses consist primarily of salaries, benefits, equity-based
compensation and outsourced labor for personnel in executive, finance, human
resources, legal and other corporate administrative functions. General and
administrative expenses also include legal fees incurred relating to corporate
and patent matters, professional fees incurred for accounting, auditing, tax and
administrative consulting services, insurance costs, facilities and depreciation
expenses.

We estimate and accrue for services provided by third parties related to the
above expenses by monitoring the status of services provided and receiving
estimates from our service providers. We reassess and adjust our accruals as
actual costs become known or as additional information becomes available.

We expect that our general and administrative expenses will increase both in the
near-term and beyond as we continue to build general corporate infrastructure to
support organization; however, we expect that the rate at which these expenses
grow will moderate throughout 2021.

Interest Income, Net

Interest income, net primarily consists of interest earned on our cash, cash equivalents and restricted cash.

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Other Income (Expense), Net

Other income (expense), net primarily consists gains (losses) on the fair value
remeasurement of our financing liabilities and private placement warrants and,
prior to their termination upon completion of the Business Combination
Transaction in October 2020, gains (losses) on the fair value remeasurement of
the Equity Commitment and Share Purchase Option. Other income (expense), net
also includes amounts for other miscellaneous income and expense unrelated to
our core operations.

The private placement warrants are free-standing financial instruments that were
reclassified from equity to other long-term liabilities on March 31, 2021. We
revalue our private placement warrants each reporting period with increases or
decreases in the fair value of these warrants recognized as an adjustment to
other income (expense), net in our consolidated statements of operations and
comprehensive loss. Changes in the fair value of our private placement warrants
result from changes to one or multiple inputs, including adjustments to the
discount rate, expected volatility and dividend yield as well as changes in the
fair value of our common stock and public warrants.

As permitted under ASC 825, Financial Instruments, we elected the Fair Value
Option for our financing liabilities, wherein the financial instruments were
initially measured at their issue-date estimated fair value and subsequently
remeasured at estimated fair value on a recurring basis at each reporting period
date. Changes in the fair value of our financing liabilities can result from
changes to one or multiple inputs, including adjustments to the discount rate
and achievement and timing of any cumulative sales-based and regulatory
milestones or changes in the probability of certain clinical events and changes
in the assumed probability associated with regulatory approval. The estimated
fair value adjustment for our financing liabilities, as required by ASC
825-10-45-5, is recognized as a component of other comprehensive income with
respect to the portion of the fair value adjustment attributed to a change in
the instrument-specific credit risk, with the remaining amount of the fair value
adjustment recognized as other income (expense), net, in the consolidated
statement of operations. As there were no material instrument specific credit
risk changes during the period, the change in fair value was recorded as a
single line item in our consolidated statement of operations.

The Equity Commitment and Share Purchase Option were free-standing financial
instruments that were recorded at their fair value on the Formation Transaction
Date. We revalued these instruments each reporting period and recorded increases
or decreases in their respective fair value as an adjustment to other income
(expense), net in our consolidated statements of operations and comprehensive
loss. Changes in the fair value of these financial instruments resulted from
changes to one or multiple inputs, including adjustments to the discount rates
and expected volatility and dividend yield as well as changes in the amount and
timing of the anticipated future funding required to settle these instruments
and the fair value of our preferred and common stock that were expected to be
exchanged to complete that additional funding. Discount rates in our valuation
models represent a measure of the credit risk associated with settling the
financial instruments. The expected dividend yield was assumed to be zero as we
have never paid dividends, nor do we have current plans to do so in the future.

Significant judgment is employed in determining the appropriateness of the assumptions underlying the initial fair value determination for each of these instruments and for each subsequent period.

Income Tax Benefit (Provision), Net

To date, we have not recorded any significant amounts related to income tax
expense, we have not recognized any reserves related to uncertain tax positions,
nor have we recorded any income tax benefits for net operating losses incurred
to date or for our research and development tax credits.

We account for income taxes using the asset and liability method, which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the consolidated financial
statements or our tax returns. Deferred tax assets and liabilities are
determined based on difference between the financial statement carrying amounts
and tax bases of existing assets and liabilities and for loss and credit
carryforwards, which are measured using the enacted tax rates and laws in effect
in the years in which the differences are expected to reverse. The realization
of our deferred tax assets is dependent upon the generation of future taxable
income, the amount and timing of which are uncertain. Valuation allowances are
provided, if, based upon the weight of available evidence, it is more likely
than not that some or all of the deferred tax assets will not be realized. As of
June 30, 2021, we continue to maintain a full valuation allowance against all of
our deferred tax assets based on our evaluation of all available evidence.

We file income tax returns in the U.S. federal tax jurisdiction and state
jurisdictions and may become subject to income tax audit and adjustments by
related tax authorities. Our initial tax return period for U.S. federal income
taxes was the 2018 period. We currently remain open to examination under the
statute of limitations by the Internal Revenue Service and state jurisdictions
for the 2019 and 2018 tax years. We record reserves for potential tax payments
to various tax authorities related to uncertain tax positions. The nature of
uncertain tax positions is subject to significant judgment by management and
subject to change, which may be substantial. These reserves are based on a
determination of whether and how much a tax benefit taken by us in our tax
filings or positions is more likely than not to be realized following the
resolution of any potential contingencies related to the tax benefit. We develop
our assessment of uncertain tax positions, and the associated cumulative
probabilities, using internal expertise and assistance from third-party experts.
As additional information becomes available, estimates are revised and refined.
Differences between

                                       29

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estimates and final settlement may occur resulting in additional tax expense.
Potential interest and penalties associated with such uncertain tax positions is
recorded as a component of our income tax benefit (provision), net. To date, no
amounts are being presented as an uncertain tax position.

Results of Operations

The following table summarizes our results of operations:

                                        For the Three Months                        For the Six Months
                                           Ended June 30,                             Ended June 30,
                                         2021           2020        Change          2021          2020        Change
Operating expenses:
Research and development              $    37,294     $  22,183          68 %    $   73,855     $  49,142          50 %
General and administrative                 13,216        12,973           2 %        27,226        23,716          15 %
Total operating expenses                   50,510        35,156          44 %       101,081        72,858          39 %
Loss from operations                      (50,510 )     (35,156 )        44 %      (101,081 )     (72,858 )        39 %
Interest income, net                           10             5         100 %            25           209         (88 )%
Other income (expense), net                (2,739 )       8,418        (133 )%       (3,164 )      (7,292 )       (57 )%
Loss before income taxes                  (53,239 )     (26,733 )        99 %      (104,220 )     (79,941 )        30 %
Income tax benefit (provision), net             -            16        (100 )%            -            16        (100 )%
Net loss                              $   (53,239 )   $ (26,717 )        99 %    $ (104,220 )   $ (79,925 )        30 %




Research and Development

The following table summarizes the components of research and development
expense:



                                     For the Three Months                       For the Six Months
                                        Ended June 30,                            Ended June 30,
                                      2021            2020                       2021          2020
(In thousands)                                                   Change                                    Change
Tavapadon                          $    12,351      $  5,589         121 %    $   23,222     $ 14,773           57 %
CVL-231                                  4,092         3,289          24 %        11,207        6,895           63 %
Darigabat                                4,936         1,773         178 %        10,000        5,100           96 %
CVL-871                                  1,286            89        1345 %         2,453          488          403 %
CVL-936                                    298           633         (53 )%          318        1,671          (81 )%
Other research and development
programs                                 2,585         2,014          28 %         4,731        3,087           53 %
Unallocated                              2,512         2,275          10 %         4,266        4,479           (5 )%
Personnel costs                          7,112         5,606          27 %        13,739       10,824           27 %
Equity-based compensation                2,122           915         132 %         3,919        1,825          115 %
Total research and development     $    37,294      $ 22,183          68 %    $   73,855     $ 49,142           50 %




For the three and six months ended June 30, 2021, compared to the same periods
in 2020, the increase in research and development expense was primarily due to
the continued advancement of our tavapadon, CVL-231, darigabat and CVL-871
programs as well as increased investment in our preclinical and discovery
research efforts. The increase in research and development expense for the
comparative periods also reflects higher personnel costs, including equity-based
compensation, as we continue to develop our organizational infrastructure to
advance our pipeline. These increases were partially offset by a reduction in
costs for the development of CVL-936 as we concluded dosing of Cohort 1 of the
Phase 1 SAD trial in the first quarter of 2020 after receiving sufficient
clinical data for the intended purposes for this trial.

General and Administrative



                                     For the Three Months                        For the Six Months
                                        Ended June 30,                             Ended June 30,
                                      2021            2020                        2021          2020
(In thousands)                                                    Change                                   Change
General and administrative         $    13,216      $ 12,973            2 %    $   27,226     $ 23,716          15 %




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For the three and six months ended June 30, 2021, compared to the same periods
in 2020, the increase in general and administrative expense was primarily due to
increased public company costs and higher personnel costs, including
equity-based compensation as we continued to grow our organization. These
increases were partially offset by a reduction in outsourced labor and the
write-off of approximately $2.5 million of deferred financing costs in June 2020
upon signing of the term sheet for the Business Combination Transaction. General
and administrative expense for the six months ended June 30, 2021, also includes
a $2.2 million net charge associated with the departure of certain executives.

Interest Income, Net



                                       For the Three Months                          For the Six Months
                                          Ended June 30,                               Ended June 30,
                                      2021              2020                        2021           2020
(In thousands)                                                       Change                                     Change
Interest income, net               $       10         $       5          100 %    $     25       $     209          (88 )%




Interest income, net primarily consists of interest earned on our cash, cash
equivalents and restricted cash. The changes in the three and six month periods
ended June 30, 2021 compared to the same period in 2020 are driven by changes in
our cash balances and market interest rates.

Other Income (Expense), Net

The following table summarizes other income (expense), net:

                                     For the Three Months                       For the Six Months
                                        Ended June 30,                            Ended June 30,
                                      2021            2020                       2021          2020
(In thousands)                                                   Change                                   Change
Gain (loss) on fair value
remeasurement of Equity
Commitment                         $         -       $ 9,110        (100 )%   $        -     $ (6,650 )      (100 )%
Loss on fair value remeasurement
of Share Purchase Option                     -          (690 )      (100 )%            -         (640 )      (100 )%
Loss on fair value remeasurement
of financing liability, related
party                                     (496 )           -          **            (496 )          -          **
Loss on fair value remeasurement
of financing liability                    (496 )           -          **            (496 )          -          **
Loss on fair value remeasurement
of private placement warrants           (1,746 )           -          **          (2,170 )          -          **
Other, net                                  (1 )          (2 )       (50 )%           (2 )         (2 )         0 %
Other income (expense), net        $    (2,739 )     $ 8,418        (133 )%   $   (3,164 )   $ (7,292 )       (57 )%


** - Not meaningful

For the three and six months ended June 30, 2021, other income (expense), net
primarily reflects net losses recognized on fair value remeasurement of our
financing liabilities and private placement warrants. The changes in fair value
remeasurement of our financing liabilities were primarily due to changes in our
discount rate and the passage of time. The changes in fair value remeasurement
of our private placement warrants were primarily due to changes in the fair
values of our common stock and public warrants, as well as changes in the
volatility implied by the market price of our public warrants. For additional
information on our warrants, please read Note 6, Fair Value Measurements, and
Note 8, Stockholders' Equity, to our unaudited condensed consolidated financial
statements included elsewhere in this Quarterly Report.

For the three and six months ended June 30, 2020, other income (expense), net
primarily reflects the net changes in fair value remeasurement of the Equity
Commitment and Share Purchase Option resulting from changes in the timing of the
anticipated future funding required in settlement of the Equity Commitment and
Share Purchase Option, as well as increases in the fair value of our preferred
and common stock expected to be exchanged for that additional funding. The
Equity Commitment and Share Purchase Option were free-standing financial
instruments that were recorded at fair value on the Formation Transaction Date.
We revalued these financial instruments each reporting period until their
termination upon the completion of our Business Combination Transaction in 2020.
For additional information on our Equity Commitment and Share Purchase Option,
please read Note 7, Equity Commitment and Share Purchase Option, to our audited
consolidated financial statements included in our Annual Report.

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Liquidity and Capital Resources

Sources of Liquidity and Capital

We have incurred significant operating losses since our inception, and we expect
to continue to incur significant and increasing expenses and operating losses
for the foreseeable future. Our net losses totaled $104.2 million and $79.9
million for the six months ended June 30, 2021 and 2020, respectively, and as of
June 30, 2021, we had an accumulated deficit of $495.1 million. We have not yet
generated revenues.

Our cash and cash equivalents totaled $327.1 million as of June 30, 2021. Until
required for use in our business, we typically invest our cash in investments
that are highly liquid, readily convertible to cash with original maturities of
90 days or less at the date of purchase. We attempt to minimize the risks
related to our cash and cash equivalents by maintaining balances in accounts
only with accredited financial institutions and, consequently, we do not believe
we are subject to unusual credit risk beyond the normal credit risk associated
with ordinary commercial banking relationships.

Prior to the Business Combination, our operations were funded primarily from the
issuance of convertible preferred stock, convertible common stock and common
stock. Upon the closing of the Business Combination Transaction in October 2020,
we received net proceeds totaling approximately $439.5 million.

On April 12, 2021, we entered into the Funding Agreements, pursuant to which
NovaQuest and Bain will provide up to $125.0 million in funding to support our
development of tavapadon for the treatment of Parkinson's disease over four
years, of which approximately $31.1 million (25% of the Total Funding
Commitment, net of $0.2 million of fees incurred by Bain and NovaQuest) was
received in April 2021.

On July 7, 2021, we completed a follow-on public offering of our common stock
pursuant to which we issued and sold 14,000,000 shares of our common stock at a
price to the public of $25.00 per share. The aggregate net proceeds from this
offering totaled approximately $328.2 million, after deducting underwriting
discounts and commissions of $21.0 million and offering expenses of
approximately $0.8 million.

Future Funding Requirements

Our primary use of cash is to fund operating expenses, primarily related to our
research and development activities. Cash used to fund operating expenses is
impacted by the timing of when we pay these expenses, as reflected in the change
in our outstanding accounts payable, accrued expenses and prepaid expenses.

We have incurred significant operating expenses since our inception, and we
expect to continue to incur significant and increasing expenses and operating
losses for the foreseeable future. In the future, we will require additional
capital to meet operational needs and capital requirements for clinical trials,
other research and development expenditures, and business development
activities.

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

?
the scope, progress, results and costs of researching and developing our current
product candidates, as well as other additional product candidates we may
develop and pursue in the future;
?
the timing of, and the costs involved in, obtaining marketing approvals for our
product candidates and any other additional product candidates we may develop
and pursue in the future;
?
the number of future product candidates that we may pursue and their development
requirements;
?
subject to receipt of regulatory approval, the costs of commercialization
activities for our product candidates, to the extent such costs are not the
responsibility of any future collaborators, including the costs and timing of
establishing product sales, marketing, distribution and manufacturing
capabilities;
?
subject to receipt of regulatory approval, revenue, if any, received from
commercial sales of our product candidates or any other additional product
candidates we may develop and pursue in the future;
?
the achievement of milestones that trigger payments under the Pfizer License
Agreement and the Funding Agreements;
?
the royalty payments due under the Pfizer License Agreement and the Funding
Agreements;
?
the extent to which we in-license or acquire rights to other products, product
candidates or technologies;
?
our ability to establish collaboration arrangements for the development of our
product candidates on favorable terms, if at all;
?
our headcount growth and associated costs as we expand our research and
development and establish a commercial infrastructure;

                                       32

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?
the costs of preparing, filing and prosecuting patent applications, maintaining
and protecting our intellectual property rights, including enforcing and
defending intellectual property related claims; and
?
the costs of operating as a public company.

Because of the numerous risks and uncertainties associated with the development
and commercialization of our product candidates, we are unable to estimate the
total amounts of increased capital outlays and operating expenditures associated
with our current and anticipated clinical trials and preclinical studies.

Our expectations with respect to our ability to fund current planned operations
is based on estimates that are subject to risks and uncertainties. Our operating
plan may change as a result of many factors currently unknown to us and there
can be no assurance that the current operating plan will be achieved in the time
frame anticipated by us, and we may need to seek additional funds sooner than
planned. If adequate funds are not available to us on a timely basis, we may be
required to delay, limit, reduce or terminate certain of our research, product
development or future commercialization efforts, obtain funds through
arrangements with collaborators on terms unfavorable to us, or pursue other
merger or acquisition strategies, all of which could adversely affect the
holdings or the rights of our stockholders.

For additional information on risks associated with our substantial capital requirements, please read the section entitled "Risk Factors" included elsewhere in this Quarterly Report.

Warrants

ARYA issued public warrants and private placement warrants, or collectively, the
warrants, in its IPO in June 2020. The warrants became exercisable beginning on
June 9, 2021. Warrants may only be exercised for a whole number of shares. No
fractional shares will be issued upon exercise of the warrants. Each whole
warrant entitles the holder to purchase one share of common stock at an exercise
price of $11.50 per share.

We will use our commercially reasonable efforts to maintain the effectiveness of
our registration statement and a current prospectus relating to those common
shares issuable upon exercise of the warrants until the warrants expire or are
redeemed, as specified in the warrant agreement. If our common stock at the time
of any exercise of a warrant is not listed on a national securities exchange, we
may, at our option, require holders of the warrants who exercise their warrants
to do so on a "cashless basis." We are not required to file or maintain in
effect a registration statement. In no event will we be required to net cash
settle any warrant.

Except as described in the warrant agreement, the private placement warrants
have terms and provisions that are identical to those of the public warrants. If
the private placement warrants are held by holders other than the Sponsor or its
permitted transferees, the private placement warrants will be redeemable by us
and exercisable by the holders on the same basis as the public warrants.

We may call the public warrants for redemption:

?
in whole and not in part;
?
at a price of $0.01 per warrant;
?
upon not less than 30 days' prior written notice of redemption to each warrant
holder; and
?
if, and only if, the closing price of our common stock equals or exceeds $18.00
per share (as adjusted for share splits, share capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within a 30-trading day
period ending on the third trading day prior to the date on which notice of
the redemption is given to the warrant holder.

We may exercise our redemption right even if we are unable to register or
qualify the underlying securities for sale under all applicable state securities
laws. If we call the public warrants for redemption, as described above, we will
have the option to require any holder that wishes to exercise the public
warrants to do so on a "cashless basis," as described in the warrant agreement.

On July 30, 2021, we announced the redemption of all of our outstanding public
warrants. Public warrants may be exercised by the holders thereof until August
30, 2021 to purchase shares of our common stock at the exercise price of $11.50
per share. Any public warrants that remain outstanding as of August 30, 2021
will be void and no longer exercisable, and the holders of those public warrants
will be entitled to receive the redemption price of $0.01 per warrant. The
private placement warrants are not subject to this redemption. As of August 6,
2021, an aggregate of 3,037,950 public warrants have been exercised, which
resulted in proceeds of approximately $34.9 million and the issuance of
3,037,950 shares of common stock.

Commencing on September 7, 2021 (ninety days after the warrants become exercisable), we may redeem any outstanding warrants:

?
in whole and not in part;
?
at $0.10 per warrant upon a minimum of 30 days' prior written notice of
redemption, provided that holders will be able to exercise their warrants on a
cashless basis prior to redemption and receive that number of shares determined
by reference to

                                       33

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?
the table included in the warrant agreement, based on the redemption date and
the "fair market value" of our shares of common stock, except as otherwise
described below;
?
if, and only if, the closing price of the shares of common stock equals or
exceeds $10.00 per share (as adjusted for share subdivisions, share dividends,
reorganizations, reclassifications, recapitalizations and the like) on the
trading day before we send the notice of redemption to the warrant holders;
?
if, and only if, the private placement warrants are also concurrently called for
redemption on the same terms as the outstanding public warrants, as described
above; and
?
if, and only if, there is an effective registration statement covering the
issuance of common stock issuable upon exercise of the warrants and a current
prospectus relating thereto available throughout the 30-day period after written
notice of redemption is given.

The warrants will expire on October 27, 2025 (five years after the completion of the Business Combination Transaction), or earlier upon redemption or liquidation.

Working Capital

The following table summarizes our total working capital, defined as current assets less current liabilities:

                                   As of
                        June 30,       December 31,
(In thousands)            2021             2020           Change
Current assets          $ 331,782     $      390,560          (15 )%
Current liabilities       (29,257 )          (29,548 )         (1 )%
Total working capital   $ 302,525     $      361,012          (16 )%




The change in working capital at June 30, 2021 from December 31, 2020, reflects
a net decrease in total current assets of $58.8 million, partially offset by a
net increase in total current liabilities of $0.3 million.

The net decrease in total current assets was primarily driven by a net decrease
in our cash and cash equivalents reflecting $82.0 million of net cash flows used
in operating activities and $8.2 million of net cash flows used for the purchase
of property and equipment, partially offset by the receipt of $31.1 million in
connection with the Funding Agreements and $2.6 million of proceeds received
from the exercise of stock options and purchases of stock under our employee
stock purchase plan (ESPP).

The net decrease in current liabilities was primarily driven by a net decrease in accrued expenses and other current liabilities related to employee compensation and personnel costs and accruals for purchases of property and equipment, partially offset by increases in accruals related to external research and development services.

Cash Flows

The following table summarizes our cash flow activity:

                                                   For the Six Months
                                                     Ended June 30,
(In thousands)                                     2021           2020
                                                                                Change

Net cash flows used in operating activities $ (82,026 ) $ (56,017 )

           46 %
Net cash flows used in investing activities         (8,243 )       (4,042 )          104 %
Net cash flows provided by (used in)
financing activities                                33,706         (1,524 ) 

**

Net decrease in cash, cash equivalents and
restricted cash                                 $  (56,563 )   $  (61,583 )

(8 )%

Cash flows used in Operating Activities

Net cash flows used in operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities. We expect cash provided by financing activities will continue to be our primary source of funds to finance operating needs and capital expenditures for the foreseeable future.

                                       34

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Net cash flows used in operating activities is derived by adjusting our net loss for:

?
non-cash operating items such as depreciation and amortization, non-cash rent
expense, equity-based compensation, impairments and write-offs of deferred
charges;
?
changes in operating assets and liabilities reflect timing differences between
the receipt and payment of cash associated with transactions and when they are
recognized in results of operations; and
?
changes in the fair value remeasurement of the Equity Commitment and Share
Purchase Option, the financial liability, related party, the financial
liability, and the private placement warrants.

For the six months ended June 30, 2021, cash used in operating activities
primarily reflects our net loss for the period of $104.2 million, adjusted for
net non-cash charges totaling $14.7 million and a net change of $7.4 million in
our net operating assets and liabilities. Our non-cash charges primarily
consisted of $11.3 million of equity-based compensation expense, $2.2 million
related to the fair value remeasurement of private placement warrants and $1.0
million related to the fair value remeasurement of our financing liabilities.
The net change in our operating assets and liabilities was primarily due to an
increase in operating lease liabilities resulting from landlord reimbursement
for tenant improvements, an increase in accounts payable and accrued expenses
related to operating activities and a decrease in prepaids and other current
assets primarily resulting from the recognition of insurance premiums paid in
advance.

For the six months ended June 30, 2020, net cash used in operating activities
primarily reflected our net loss for the period of $79.9 million, adjusted by
non-cash charges totaling $17.5 million and a net change of $6.4 million in
relation to our net operating assets and liabilities. Our non-cash charges
primarily consisted of net losses totaling $7.3 million recognized related to
the Equity Commitment and Share Purchase Option, $6.4 million of equity-based
compensation expense, the $2.5 million write-off of deferred costs related to
our abandoned initial public offering and other financing activities and
$1.0 million of non-cash rent expense. The net change in our operating assets
and liabilities was primarily due to an increase in accounts payable and accrued
expenses and other current liabilities, and a decrease in prepaid expenses and
other current assets.

Cash flows used in Investing Activities

For the six months ended June 30, 2021, cash used in investing activities reflected $8.2 million used for purchases of property and equipment, primarily related to the build-out of our Cambridge, Massachusetts headquarters.

For the six months ended June 30, 2020, cash used in investing activities reflected $4.0 million used for purchases of property and equipment, primarily related to the build-out of our Cambridge, Massachusetts headquarters.

Cash flows provided by Financing Activities

For the six months ended June 30, 2021, net cash provided by financing
activities totaled $33.7 million, primarily consisting of $31.3 million related
to the Funding Agreements, described in Note 5, Financing Liabilities, to our
unaudited condensed consolidated financial statements included elsewhere in this
Quarterly Report, and $2.6 million of proceeds received from stock option
exercises and purchases of stock under our ESPP.

For the six months ended June 30, 2020, net cash used in financing activities
totaled $1.5 million, reflecting deferred costs related to our abandoned initial
public offering and other financing activities.

Contractual Obligations and Other Commitments

Our contractual obligations primarily consist of our obligations under non-cancellable operating leases, contracts and other purchase obligations. We did not have any debt obligations as of June 30, 2021 or December 31, 2020.

Our most significant contracts relate to agreements with CROs for clinical
trials and preclinical studies, CMOs and other service providers for operating
purposes, which we enter into in the normal course of business. These contracts
are generally cancelable at any time by us following a certain period after
notice and therefore, we believe that our non-cancelable obligations under these
agreements are not material. In addition, we have obligations with respect to
potential future royalties payable, contingent development, regulatory and
commercial milestone payments and amounts related to uncertain tax positions.
The timing and amount of such obligations are unknown or uncertain as of
June 30, 2021. For additional information on potential royalties and milestone
payments payable to Pfizer, see "Our Agreements with Licensors and
Stockholders-Pfizer License Agreement" in our Annual Report.

We completed the build-out and took occupancy of our corporate headquarters in
Cambridge, Massachusetts in the second quarter of 2021. As of June 30, 2021, our
remaining obligations related to the build-out of our corporate headquarters
were insignificant.

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Funding Agreements

On April 12, 2021, we entered into the Funding Agreements, pursuant to which we
will receive up to a combined total of up to $125.0 million, to support our
development of tavapadon for the treatment of Parkinson's disease. In return, we
agreed to pay to NovaQuest and Bain significant regulatory milestone, sales
milestone and royalty payments upon approval of tavapadon by the FDA that
collectively will not exceed $531.3 million. In addition, we have the option to
satisfy our payment obligations to NovaQuest and Bain upon the earlier of FDA
approval or May 1, 2025, by paying an amount equal to the Total Funding
Commitment multiplied by an initial factor of 3.00x. This factor will increase
ratably over time up to a maximum of 4.25x, less amounts previously paid to
NovaQuest and Bain.

For additional information on our funding agreements, please read Note 5, Financing Liabilities, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Contract Research and Manufacturing Organizations

As of June 30, 2021 and December 31, 2020, we recorded accrued expenses of approximately $11.2 million and $7.1 million, respectively, in our consolidated balance sheets for expenditures incurred by CROs and CMOs.

Tax Related Obligations

To date, we have not recognized any reserves related to uncertain tax positions. As of June 30, 2021 and December 31, 2020, we had no accrued interest or penalties related to uncertain tax positions.

Off-balance sheet arrangements

We have not entered into any off-balance sheet arrangements and do not have holdings in any variable interest entities.

Critical Accounting Policies and Estimates

This management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America, or GAAP.

The preparation of the consolidated financial statements in conformity with GAAP
requires us to make estimates, judgments and assumptions that may affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of expenses during the reporting periods. Our estimates are
based on our historical experience and on various other factors that we believe
are reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Our most critical accounting policies and estimates were described under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations-Critical Accounting Policies and Estimates" in our Annual Report.
There have been no material changes to our critical accounting policies and
estimates described in our Annual Report except as described as follows:

Fair Value Option for Funding Agreements

We elected to account for our funding agreements and related financial
liabilities described in Note 5, Financing Liabilities, in accordance with the
fair value option permitted under ASC 825-10, Financial Instruments. A liability
associated with each of our funding agreements was initially recognized at their
estimated fair value within our condensed consolidated balance sheets. We
revalue these financial instruments on a recurring basis each reporting period
with subsequent changes in fair value, excluding the impact of the change in
fair value related to instrument-specific credit risk, separately presented as a
component of other income (expense), net in our condensed consolidated
statements of operations and comprehensive income. The portion of the fair value
adjustment attributed to a change in the instrument-specific credit risk will be
recognized and separately presented as a component of other comprehensive
income.

Changes in the fair value of our financing liabilities can result from changes
to one or multiple inputs, including adjustments to the discount rate and
achievement and timing of any cumulative sales-based and regulatory milestones
or changes in the probability of certain clinical events and changes in the
assumed probability associated with regulatory approval. These fair value
measurements represent Level 3 measurements as they are based on significant
inputs not observable in the market.

Up-front, direct costs and fees related to the instruments for which we have elected the fair value option were recognized in general and administrative expense in earnings as incurred.

The decision to elect the fair value option is determined on an
instrument-by-instrument basis, must be applied to an entire instrument and is
irrevocable once elected, but need not be applied to all similar instruments.
Assets and liabilities measured at fair

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value pursuant to ASC 825-10 are required to be reported separately from those instruments measured using another accounting method.

For additional information related to our qualifying instruments that we have
elected to account for under the fair value option, please read Note 5,
Financing Liabilities, and Note 6, Fair Value Measurements to our unaudited
condensed consolidated financial statements included elsewhere in this Quarterly
Report.

Emerging Growth Company and Smaller Reporting Company Status

We are currently an "emerging growth company" as defined in Section 2(a)(19) of
the Securities Act of 1933, or the Securities Act, as modified by the Jumpstart
Our Business Startups Act, or the JOBS Act, and a "smaller reporting company" as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or
the Exchange Act. As such, we are eligible for, have taken and intend to take
advantage of certain exemptions from various reporting requirements applicable
to other public companies that are not emerging growth companies and/or smaller
reporting companies for as long as we continue to be an emerging growth company
and/or a smaller reporting company, including (i) the exemption from the auditor
attestation requirements with respect to internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and
say-on-golden parachute voting requirements and (iii) reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy
statements.

In addition, the JOBS Act provides that an emerging growth company can take
advantage of an extended transition period for complying with new or revised
accounting standards. This allows an emerging growth company to delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have elected to avail ourselves of this extended
transition period and, as a result, we may adopt new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-public companies instead of the dates required for other public
companies.

As of June 30, 2021, the last business day of our most recently completed second
fiscal quarter, the market value of our common stock that was
held by non-affiliates exceeded $700.0 million, and as of December 31, 2021, we
will have been public for more than one year and filed at least one annual
report. As a result, we will lose our emerging growth company status and our
smaller reporting company status as of the end of the current fiscal year ending
December 31, 2021, and we will be subject to certain requirements that apply to
other public companies but did not previously apply to us due to our status as
an emerging growth company, including the provisions of Section 404(b) of the
Sarbanes-Oxley Act, which require that our independent registered public
accounting firm provides an attestation report on the effectiveness of our
internal control over financial reporting.

Recent Accounting Pronouncements

For a discussion of new accounting standards and their expected impact on our
consolidated financial statements or disclosures, please read Note 3, Recent
Accounting Guidance, to our unaudited condensed consolidated financial
statements included elsewhere in this Quarterly Report.

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