You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed consolidated financial
statements and related notes thereto appearing elsewhere in this Quarterly
Report on Form 10-Q, or Quarterly Report, and our audited financial statements
and related notes for the year ended December 31, 2021 included in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission, or the
SEC, on March 18, 2022, which we refer to as the 2021 Annual Report on Form
10-K. Some of the information contained in this discussion and analysis 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. Please also see the section entitled "Cautionary Note
Regarding Forward-Looking Statements and Industry Data" of this Quarterly
Report.

Overview



We are a clinical-stage biotechnology company dedicated to discovering and
developing transformative treatments for hearing and balance disorders, one of
the largest areas of unmet need in medicine. We aim to restore and improve
hearing and balance through the restoration and regeneration of functional hair
cells and non-sensory support cells within the inner ear. We have built a
proprietary platform that integrates single-cell genomics and bioinformatics
analyses, precision gene therapy technologies and our expertise in inner ear
biology. We are leveraging our platform to advance our pipeline of preclinical
gene therapy programs that are designed to selectively replace genes for the
treatment of congenital, monogenic hearing loss and to regenerate inner ear hair
cells for the treatment of acquired hearing and balance disorders. We are
developing our lead gene therapy product candidate, DB-OTO, to provide hearing
to individuals born with profound hearing loss due to mutation of the otoferlin,
or OTOF, gene. In addition to DB-OTO, we are advancing AAV.103 to restore
hearing in individuals with mutations in the gap junction beta-2, or GJB2, gene
and AAV.104 to restore hearing in individuals with mutations in the stereocilin,
or STRC, gene. We also have additional gene therapy programs to convert
supporting cells, the cells adjacent to hair cells, into either cochlear or
vestibular hair cells in order to restore hearing or balance function. In
addition to our gene therapy programs, we are developing DB-020 for the
prevention of cisplatin-induced hearing loss, which we are currently evaluating
in patients in a Phase 1b clinical trial.

We are developing our lead gene therapy product candidate, DB-OTO, to provide
hearing to individuals born with profound hearing loss due to an OTOF
deficiency. OTOF is a protein expressed in the inner hair cells of the cochlea
that enables communication between sensory cells of the inner ear and the
auditory nerve by regulating synaptic transmission. We have designed DB-OTO
utilizing a proprietary, cell-selective promoter to provide expression of OTOF
that is limited to hair cells. In our preclinical studies, the hair
cell-selective expression of OTOF provided by DB-OTO enabled restoration of
hearing in mice that was more durable than when OTOF was expressed under the
control of a ubiquitous promoter, which is designed to drive expression in all
cells. In addition to the loss of durability, we observed that use of a
ubiquitous promoter in mice resulted in the loss of inner hair cells throughout
the cochlea. DB-OTO is an adeno-associated virus, or AAV, based gene therapy
intended to be delivered to patients using the surgical approach employed by
neurotologists and pediatric otolaryngologists during a standard cochlear
implantation procedure. We believe the cell-selective expression of DB-OTO and
its delivery by this established surgical procedure will provide a core
competitive advantage important to the success of DB-OTO. Based on feedback from
the U.S. Food and Drug Administration, or FDA, we are currently conducting
preclinical studies of DB-OTO to support our planned submission of an
investigational new drug application, or IND, to the FDA. We have also completed
scientific advice meetings with multiple European regulatory authorities to
support our planned submission of a clinical trial application, or CTA, within
Europe. We plan to submit an IND and/or CTA in the second half of 2022. We have
commenced trial site startup activities, and subject to clearance of our IND or
CTA, we expect to initiate a Phase 1/2 clinical trial of DB-OTO in the first
half of 2023. The FDA has granted orphan drug designation and rare pediatric
disease designation for DB-OTO for the treatment of OTOF-related, congenital
hearing loss. In addition to DB-OTO, we are advancing AAV.103 and AAV.104, gene
therapy programs targeting hearing loss resulting from other single gene
mutations, or monogenic forms of hearing loss. AAV.103 aims to restore hearing
in individuals with mutations in the GJB2 gene and AAV.104 aims to restore
hearing in individuals with mutations in the STRC gene. We anticipate that we
will identify a product candidate for our AAV.103 program in 2022.

We are also using our platform to design and develop a pipeline of gene
therapies for hair cell regeneration within the inner ear. We are engineering
gene therapies to convert supporting cells, the cells adjacent to hair cells,
into either cochlear or vestibular hair cells in order to restore hearing or
balance function. These gene therapy programs are designed to express the
developmental or reprogramming factors that regulate cell fate and use our
proprietary, cell-selective promoters to control expression spatially and
temporally. Our DB-ATO and AAV.201 gene therapy programs aim to restore balance
by promoting regeneration of hair cells in the vestibular system, the sensory
system responsible for balance. In these programs, we are focused on the
development of a treatment for bilateral vestibulopathy, or BVP, a debilitating,
acquired condition that significantly impairs balance, mobility and stability of
vision. DB-ATO is an AAV-based gene therapy that utilizes a proprietary,
supporting cell-selective promoter to express ATOH1, a transcription factor
required for hair cell differentiation. We are also developing AAV.201, which
combines ATOH1 with another

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reprogramming factor to promote further differentiation of the regenerated
cells. In addition, we are advancing our cochlear hair cell regeneration program
to treat acquired hearing loss by regenerating cochlear outer hair cells. We
plan to announce the targets for AAV.201 and our cochlear hair cell regeneration
program in 2022.

In addition to our gene therapy product candidates and programs, we are
developing a clinical-stage product candidate, DB-020, for the prevention of
cisplatin-induced hearing loss. DB-020 is a novel formulation of sodium
thiosulfate, or STS, that we have optimized for local delivery to the ear. STS
inactivates cisplatin, a widely used chemotherapy that often leads to hearing
loss and related complications in patients being treated for cancer. We are
developing DB-020 to prevent cisplatin-induced hearing loss without impacting
the beneficial, anti-tumor effect of cisplatin. In 2019, we completed a
randomized, double-blind, placebo-controlled Phase 1 clinical trial of DB-020 in
healthy volunteers, in which DB-020 was well tolerated. Following the Phase 1
clinical trial, we initiated a randomized, double-blind, placebo-controlled,
multicenter Phase 1b clinical trial in 2020 to evaluate the safety and efficacy
of DB-020 for the prevention of cisplatin-induced hearing loss. In June 2022, we
reported topline data from an interim analysis of the ongoing Phase 1b clinical
trial.

Patients enrolled in the Phase 1b clinical trial were randomized to receive one
of two doses of DB-020 in one ear while the contralateral ear received placebo,
enabling each patient to serve as their own control. Patients were administered
DB-020 and placebo up to three hours prior to each cisplatin infusion.
Consistent with the results of the Phase 1 clinical trial, data from the interim
analysis demonstrated that DB-020 was well tolerated, with mostly mild to
moderate adverse events and no significant safety issues observed. In the data
from the interim analysis, 88% of patients experienced ototoxicity in their
placebo-treated ear, and of these patients, 87% were partially or completely
protected from ototoxicity in their DB-020-treated ears. The interim analysis
included data collected as of February 4, 2022 from 19 cisplatin-naïve cancer
patients being treated with high doses of cisplatin every 21 or 28 days. Of the
19 patients in the interim analysis, 17 patients had evaluable audiograms at
baseline and after being dosed with DB-020 in one ear and placebo in the
contralateral ear in conjunction with their prescribed infusion of cisplatin
chemotherapy. Ototoxicity was defined according to the American
Speech-Language-Hearing-Association criteria for significant ototoxic change.

We have ceased enrolling patients in the clinical trial in response to the
positive interim analysis results from the first 19 patients enrolled. We are
working with key opinion leaders to integrate learnings from the interim
analysis into an updated clinical development plan and may consult with
regulatory agencies as part of that planning. We are considering a range of
potential approaches by which to advance DB-020, including entering into
strategic collaborations for the further development and commercialization of
DB-020. The FDA has granted fast track designation for DB-020 for the prevention
of cisplatin-related ototoxicity.

Since inception, we have devoted substantially all of our resources on
organizing and staffing, business planning, raising capital, establishing our
intellectual property portfolio and performing research and development of our
product candidates, programs and platform. On February 5, 2021, we issued and
sold 15,870,209 shares of our Series D convertible preferred stock for $27.4
million of aggregate cash proceeds, net of issuance costs. On February 17, 2021,
we completed an initial public offering, or IPO, of our common stock in which we
issued and sold 7,062,000 shares of our common stock at a public offering price
of $18.00 per share, and on February 24, 2021, we issued and sold an additional
600,000 shares of common stock pursuant to the underwriters' partial exercise of
their option to purchase additional shares of common stock, for aggregate net
proceeds of $125.0 million. Upon the closing of our IPO, all of our outstanding
shares of convertible preferred stock automatically converted into 16,662,011
shares of common stock. Subsequent to the closing of our IPO, there were no
shares of preferred stock outstanding. To date, we have financed our operations
primarily with proceeds from sales of our convertible preferred stock (including
borrowings under convertible promissory notes, which converted into convertible
preferred stock in 2015), payments under our license and collaboration agreement
with Regeneron Pharmaceuticals, Inc., or Regeneron, and, most recently, from the
sale of common stock in our IPO.

We have not generated any revenue from product sales, and do not expect to
generate any revenue from product sales for at least the next several years. All
of our programs are still in preclinical and early-stage clinical development.
Our ability to generate product revenue sufficient to achieve profitability will
depend heavily on the successful development and eventual commercialization of
one or more of our product candidates, if approved. Since inception, we have
incurred significant operating losses. Our net losses were $31.1 million for the
six months ended June 30, 2022, and $51.8 million and $39.3 million for the
years ended December 31, 2021 and 2020, respectively. As of June 30, 2022, we
had an accumulated deficit of $245.6 million. We expect to incur significant
expenses and operating losses for the foreseeable future. We anticipate that our
expenses will increase substantially if and as we:

submit an IND or CTA, and initiate a planned Phase 1/2 clinical trial of DB-OTO for the treatment of profound hearing loss due to mutation of the OTOF gene;

continue our current research programs and our preclinical development of DB-OTO, AAV.103, AAV.104, AAV.201, DB-ATO and any product candidates that may arise from our current or future research programs;

continue our clinical development of DB-020, including our ongoing Phase 1b clinical trial;


                                       25
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advance additional product candidates into preclinical and clinical development;

expand the capabilities of and invest in our platform;

seek marketing approvals for any product candidates that successfully complete clinical trials;

ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

expand, maintain and protect our intellectual property portfolio;

hire additional clinical, research, development, scientific, regulatory, and quality control personnel;

establish and maintain agreements with manufacturers for our product candidates; and


add operational, legal, compliance, financial and management information systems
and personnel, including personnel to support our research, product development
and future commercialization efforts and support our operations as a public
company.

In addition, as we progress toward marketing approval for any of our product
candidates, we expect to incur significant commercialization expenses related to
product manufacturing, marketing, sales and distribution.

As a result, we will need substantial additional funding to support our
continuing operations and pursue our strategy. Until such time as we can
generate significant revenue from product sales, if ever, we expect to finance
our operations through a combination of equity offerings, debt financings and
other sources of capital, which may include collaborations with other companies
or other strategic transactions. We may be unable to raise additional funds or
enter into other collaborations, strategic alliances or licensing arrangements
with third parties when needed or on favorable terms, or at all. If we are
unable to raise additional funds through equity or debt financings or enter into
such other agreements when needed, we may have to significantly delay, reduce or
eliminate some or all of 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.

Because of the numerous risks and uncertainties associated with product
development, we are unable to predict the timing or amount of increased expenses
or when or if we will be able to achieve profitability. Even if we are able to
generate revenue from product sales, we may not become profitable. If we fail to
become profitable or are unable to sustain profitability on a continuing basis,
then we may be unable to continue our operations at planned levels and be forced
to reduce or terminate our operations.

As of June 30, 2022, we had cash, cash equivalents and available-for-sale
securities of $125.6 million. We believe that our cash, cash equivalents and
available-for-sale securities as of June 30, 2022 will enable us to fund our
operating expenses and capital expenditure requirements into 2024. We have based
this estimate on assumptions that may prove to be wrong, and we could exhaust
our available capital resources sooner than we anticipate.

Impact of COVID-19 on Our Business



The worldwide COVID-19 pandemic has affected and may affect in the future our
ability to initiate and complete preclinical studies, delay the initiation and
completion of our current and planned clinical trials, disrupt regulatory
activities or have other adverse effects on our business, results of operations,
financial condition and prospects. In addition, the pandemic has caused
substantial disruption to global supply chains and may adversely impact
economies worldwide, both of which could adversely affect our business,
operations and ability to raise funds to support our operations.

We are following, and plan to continue to follow recommendations from federal,
state and local governments regarding workplace policies, practices and
procedures. In response to the COVID-19 pandemic and in accordance with
direction from state and local governmental authorities, we previously
restricted access to our facility to those individuals who must perform critical
research, translational medicine and laboratory support activities that must be
completed on site, limited the number of such people that can be present at our
facility at any one time, and required that most of our employees work remotely.
In February 2022 we re-opened our facility to all of our employees. Screening
and enrollment in our Phase 1b clinical trial of DB-020 in Australia and the
United States had been adversely impacted by the COVID-19 pandemic. Patient
screening and enrollment were paused in the second quarter of 2020 in both
Australia and the United States, and screening for enrollment did not resume
until early in the third quarter of 2020 in Australia and early in the fourth
quarter of 2020 in the United States. We have also experienced delays in site
start-up and the withdrawal of some sites in the United States. In addition, we
and the third-party manufacturers, contract research organizations, or CROs, and
academic collaborators that we engage have faced in the past and may face in the
future disruptions that could affect our ability to initiate and complete
preclinical studies or clinical trials. This includes disruptions in procuring
items and providing adequate resources that are essential for our research and
development activities, such as, for example, raw materials used in the
manufacture of our product candidates, laboratory supplies for our preclinical
studies and clinical trials, or animals that are used for

                                       26
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preclinical testing, in each case, for which there may be shortages because of
ongoing efforts to address the COVID-19 pandemic, including supply chain
disruptions. Due to recent increased quarantine mandates in China, the receipt
of shipments and data from some of our vendors had been more difficult and
unpredictable. This caused some delays in preclinical studies for our gene
therapy programs. The quarantine mandates have been largely resolved as of June
2022. We have been working with our CROs to assess the impact of the increased
mandates on our activities, and contingency planning is on-going.

We cannot be certain what the overall impact of the COVID-19 pandemic will be on
our business. The extent of the impact of COVID-19 on our business will depend
on the length and severity of the pandemic, including the extent there is any
resurgence of the COVID-19 virus or any variant strains of the virus, the
availability and effectiveness of vaccines and the impact of the foregoing on
our preclinical studies, current and planned clinical trials, employees and
vendors, which is uncertain and cannot be predicted. The pandemic has the
potential to adversely affect our business, financial condition, results of
operations and prospects.

License and Collaboration Agreement with Regeneron



In November 2017, we entered into a license and collaboration agreement with
Regeneron, or the Regeneron Agreement. The Regeneron Agreement had an original
research term of five years and granted Regeneron the right to extend the
research term for up to two years in one-year intervals. In November 2021,
Regeneron exercised its right to extend the research term and extended the
research term by one year to November 2023. The Regeneron Agreement is focused
on the discovery and development of new potential therapies directed to a set of
defined collaboration targets. We are currently developing DB-OTO, AAV.103 and
AAV.104 in collaboration with Regeneron under the Regeneron Agreement. In
October 2020, we entered into an amendment to the Regeneron Agreement pursuant
to which, among other things, ATOH1, the target of our DB-ATO program, was
removed as a collaboration target and the terms and plans for the DB-OTO and
AAV.103 programs were modified. We issued 10,000,000 shares of our Series C
convertible preferred stock to Regeneron in consideration for its entry into the
amendment.

Pursuant to the Regeneron Agreement, Regeneron paid us an upfront fee of $25.0
million and purchased 12,500,000 shares of our Series B convertible preferred
stock at a price per share of $2.00. Regeneron is provided two options to extend
the research term for a one-year period each and is obligated to pay us $10.0
million for each extension. The first option to extend the research term was
exercised by Regeneron in November 2021. The $10.0 million fee is payable in the
fourth quarter of 2022. On a collaboration-product-by-collaboration-product
basis, upon achievement of pre-defined milestones which began at initiation of
manufacturing to support Good Laboratory Practices, or GLP, toxicology studies
and conclude at initiation of a Phase 2 clinical trial, Regeneron is obligated
to pay us milestone payments of up to $35.5 million in aggregate if the
collaboration product is a biologic or up to $33.5 million in aggregate if the
collaboration product is a small molecule, which is intended to reflect
approximately half of the total cost needed to achieve the next milestone. From
and after the initiation of a registration-enabling trial, unless Regeneron
decides to opt-out, we have agreed to split development and regulatory costs
with Regeneron on an equal basis through the registration-enabling trials.
Through June 30, 2022, we had received an aggregate of $5.5 million in milestone
payments from Regeneron pursuant to the collaboration.

Under the Regeneron Agreement, we are required to pay Regeneron tiered royalties
on the worldwide net sales of collaboration products at percentages which range
from mid-single digit to mid-thirties, with the exact royalty rate depending on
the extent to which Regeneron shared in the funding of the collaboration
product, the level of net sales of the collaboration product, the nature of any
intellectual property contributed by Regeneron included in the collaboration
product and whether the product is sold inside or outside the field. In the case
of collaboration products for which Regeneron does not opt-out, our obligation
to pay tiered royalties on the worldwide net sales ranges from percentages in
the mid-twenties to mid-thirties. In the case of collaboration products for
which Regeneron opts-out, our obligation to pay tiered royalties on the
worldwide net sales ranges from percentages in the mid-single digits to
mid-twenties. Our obligation to make royalty payments to Regeneron on account of
worldwide net sales of collaboration products continues so long as we, our
affiliates, licensees or sublicensees sell collaboration products. To date, we
have not made any royalty or other payments to Regeneron under the Regeneron
Agreement.

Pursuant to the amendment to the Regeneron Agreement, Regeneron agreed to pay us
$0.3 million to fund our ongoing research program and $0.5 million to help
secure the services of a contract development and manufacturing organization, or
CDMO. The $0.5 million payment was creditable against the milestone associated
with the initiation of manufacturing to support GLP toxicology studies of
DB-OTO. Additionally, Regeneron agreed to reimburse us for up to $10.5 million
of third-party costs related to the GLP toxicology studies of DB-OTO as such
costs are incurred, and we agreed that the aggregate potential milestone
payments for DB-OTO would be reduced by $15.0 million. In addition,
notwithstanding its removal from the collaboration, for DB-ATO, we agreed to pay
to Regeneron a royalty calculated as a low-to mid-single digit percentage of net
sales of DB-ATO, on a country-by-country basis, until the latest of the
expiration of the last patent covering DB-ATO in such country, the expiration of
all applicable regulatory exclusivities for DB-ATO in such country and the tenth
anniversary of the first commercial sale of DB-ATO in such country.

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As of June 30, 2022, we had unbilled receivables of $10.0 million due from Regeneron, relating to Regeneron exercising its right to extend the research term by one year to November 2023.



Because we consider Regeneron a collaborative partner that is subject to the
significant risks and rewards under the Regeneron Agreement, we have accounted
for the Regeneron Agreement under FASB ASC Topic 808, Collaborative
Arrangements, or ASC 808. Under ASC 808, we view all consideration received from
Regeneron as reimbursement of our costs under the Regeneron Agreement. These
costs are accounted for as research and development expenses in our condensed
consolidated statements of operations and comprehensive (loss) income. As such,
we are recognizing total consideration of $46.9 million, comprised of the $25.0
million upfront payment, the additional payment of $0.3 million received from
Regeneron pursuant to the amendment, the reimbursement of $10.5 million of
third-party costs related to the GLP toxicology studies of DB-OTO, the $5.5
million of cumulative milestone payments received, and the $10.0 million
extension payment due in the fourth quarter of 2022, net of the $4.4 million in
fair value of the Series C convertible preferred stock issued to Regeneron, over
the research term as a reduction to research and development expenses
(contra-research and development expense) in our condensed consolidated
statements of operations and comprehensive (loss) income based on our progress
toward completion of our research activities under the research plan. Any future
milestone payments will be included in the measurement of contra-research and
development expense if and when achieved. For the three months ended June 30,
2022 and 2021, we recognized contra-research and development expense of
approximately $2.2 million and $3.8 million, respectively, related to
consideration received from Regeneron. We recognized $5.2 million and $5.7
million as contra-research and development expenses during the six months ended
June 30, 2022 and 2021, respectively. As of June 30, 2022, we had unbilled
receivables of $10.0 million due from Regeneron, relating to Regeneron
exercising its right to extend the research term by one year to November 2023.
As of June 30, 2022, we had deferred collaboration liabilities of $19.3 million
on our condensed consolidated balance sheet, which consisted of $9.1 million
classified as current deferred collaboration liabilities and $10.2 million
classified as long-term collaboration liabilities. See Note 12 to our condensed
consolidated financial statements appearing elsewhere in this Quarterly Report.

Financial Operations Overview

Revenue

We have not generated any revenue since inception and do not expect to generate
any revenue from the sale of products for at least the next several years. If
our development efforts for our current or future product candidates are
successful and result in marketing approval or if we enter into collaboration or
license agreements with third parties, we may generate revenue in the future
from product sales or payments from third-party collaborators or licensors.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities and development of our programs and product candidates. These expenses include:

personnel-related expenses, including salaries, benefits and stock-based compensation expense for employees engaged in research and development functions;


expenses incurred under agreements with third parties, such as consultants and
investigative sites that conduct our preclinical studies and clinical trials and
in-licensing arrangements;

costs incurred to maintain compliance with regulatory requirements;

costs incurred with third-party CDMOs to acquire, develop and manufacture materials for preclinical and clinical studies;

costs associated with our technology and our intellectual property portfolio;

expenses incurred for the procurement of materials, laboratory supplies and non-capital equipment used in the research and development process; and


depreciation, amortization and other direct and allocated expenses, including
rent, insurance and other operating costs, incurred as a result of our research
and development activities.

We use our employee and infrastructure resources for the advancement of our
platform and for discovering and developing programs and product candidates. We
track direct research and development costs, consisting primarily of external
costs, such as fees paid to CDMOs, CROs, and consultants in connection with our
preclinical studies, clinical trials and experiments by program after a
development candidate has been identified. Due to the number of ongoing programs
and our ability to use resources across several projects, personnel-related
expenses and indirect or shared operating costs incurred for our research and
development programs are not

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recorded or maintained on a program-by-program basis, nor are our external program costs incurred for our programs prior to the identification of a development candidate for such program.



The following table sets forth our research and development expense, including
direct program-specific expense summarized by program, personnel-related
expenses and indirect or shared operating costs recognized during each period
presented (in thousands):


                                              Three Months Ended           Six Months Ended
                                                   June 30,                    June 30,
                                              2022          2021          2022          2021
DB-OTO                                     $    6,023     $   4,960     $  10,194     $  7,998
DB-020                                            343         1,040           941        1,335
Personnel-related (including stock-based
compensation)                                   3,519         2,443         6,751        4,546
Other indirect research and development
expenses                                        1,356        (1,616 )       

821 (1,032 ) Total research and development expenses $ 11,241 $ 6,827 $ 18,707 $ 12,847





Consideration we receive under the Regeneron Agreement is being recognized as a
reduction to research and development expense (contra-research and development
expense) in our condensed consolidated statements of operations and
comprehensive (loss) income based on our progress towards completion of our
research activities under the research plan for the collaboration. For purposes
of the table above, recognition of consideration received from Regeneron is
included as a reduction of other indirect research and development expenses. For
the three months ended June 30, 2022 and 2021, we recognized contra-research and
development expense of approximately $2.2 million and $3.8 million,
respectively, related to consideration received from Regeneron. For the six
months ended June 30, 2022 and 2021, we recognized contra-research and
development expense of approximately $5.2 million and $5.7 million,
respectively, related to consideration received from Regeneron.

Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher costs
than those in earlier stages of clinical development, primarily due to the
increased size and duration of later-stage clinical trials. We expect that our
research and development expenses will continue to increase for the foreseeable
future as we advance our programs and product candidates into and through the
development phase, and as we continue to develop additional product candidates.
We also expect our discovery research efforts and our related personnel costs
will increase and, as a result, we expect our research and development expenses,
including costs associated with stock-based compensation, will increase above
historical levels. In addition, we may incur additional expenses related to
milestone and royalty payments payable to third parties with whom we may enter
into license, acquisition and option agreements to acquire the rights to future
product candidates.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates or programs. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

the timing and progress of preclinical and clinical development activities;

the number and scope of preclinical and clinical programs we decide to pursue;

our ability to successfully complete clinical trials with safety, potency and purity profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;

our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates;

our ability to hire and retain key research and development personnel;

our successful enrollment in and completion of clinical trials;

the costs associated with the development of any additional product candidates we develop or acquire through collaborations;


our ability to establish and maintain agreements with third-party manufacturers
for clinical supply for our clinical trials and commercial manufacturing, if our
product candidates are approved;

the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;


our ability to obtain and maintain patent, trade secret and other intellectual
property protection and regulatory exclusivity for our product candidates if and
when approved;

our receipt of marketing approvals from applicable regulatory authorities;


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our ability to commercialize products, if and when approved, whether alone or in collaboration with others;

the continued acceptable safety profiles of the product candidates following approval; and

the effects of the COVID-19 pandemic on our research and development employees, contractors and those who may participate in our studies.



A change in any of these variables with respect to the progress of any of our
product candidates would significantly change the costs, timing and viability
associated with the development of that product candidate. We may never succeed
in obtaining regulatory approval for any product candidate we may develop.

General and Administrative Expense



General and administrative expenses consist primarily of personnel-related
costs, including salaries, benefits and stock-based compensation, for personnel
in our executive, finance, legal, business development, human resources and
administrative functions. General and administrative expenses also include legal
fees relating to corporate matters and costs to secure and defend our
intellectual property; professional fees for accounting, auditing, tax, human
resources and administrative consulting services; insurance costs;
administrative travel expenses and facility-related expenses, which include
direct depreciation costs and allocated expenses for office rent and other
operating costs. These costs relate to the operation of the business, unrelated
to the research and development function, or any individual program.

We anticipate that our general and administrative expenses will increase in the
future as we increase our headcount to support the expected growth in our
research and development activities and the potential commercialization of our
product candidates. We also expect to continue to incur increased expenses
associated with being a public company, including increased costs of accounting,
audit, legal, regulatory and tax-related services associated with maintaining
compliance with exchange listing and SEC requirements, director and officer
insurance costs and investor and public relations costs. We also expect to incur
additional intellectual property-related expenses as we file patent applications
to protect innovations arising from our research and development activities.

Interest Income

Interest income consists of interest income earned from our cash, cash equivalents and available-for-sale securities.

Income Taxes



Since our inception, we have not recorded any U.S. federal, foreign, or state
income tax benefits for the net losses we have incurred in each year or for our
earned research and development tax credits as it is more likely-than-not that
these benefits will not be realized. We have U.S. federal and state net
operating loss carryforwards and research and development tax credit
carryforwards to offset future taxable income. We have recognized a reserve for
a foreign uncertain tax position and recorded a foreign tax provision.

Income taxes are determined at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences. Our income tax provision may be significantly affected by changes to our estimates.


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Results of Operations

Comparison of the three months ended June 30, 2022 and 2021



The following tables summarizes our results of operations for each period
presented (in thousands):


                                                    Three Months Ended June 30,
                                                     2022                 2021            Change
Operating expenses:
Research and development                        $       11,241       $        6,827     $    4,414
General and administrative                               5,862                4,899            963
Total operating expenses                                17,103               11,726          5,377
Loss from operations                                   (17,103 )            (11,726 )       (5,377 )
Other income:
Interest income                                             95                   75             20
Total other income, net                                     95                   75             20
Net loss before provision for income taxes             (17,008 )            (11,651 )       (5,357 )
Provision for income taxes                                 (38 )                  -            (38 )
Net loss                                        $      (17,046 )     $      (11,651 )   $   (5,395 )

Research and Development Expenses

The following tables summarizes our research and development expenses for each period presented (in thousands):




                                                     Three Months Ended June 30,
                                                      2022                 2021            Change
DB-OTO                                           $        6,023       $        4,960     $    1,063
DB-020                                                      343                1,040           (697 )
Personnel-related (including stock-based
compensation)                                             3,519                2,443          1,076
Other indirect research and development
expenses                                                  1,356               (1,616 )        2,972
Total research and development expenses          $       11,241       $     

6,827 $ 4,414

Research and development expenses for the three months ended June 30, 2022 were $11.2 million, compared to $6.8 million for the three months ended June 30, 2021. The increase of $4.4 million was primarily attributable to the following:

$1.1 million increase in expenses incurred to advance our DB-OTO program,
primarily attributable to an increase of $0.7 million in preparation for
clinical trials and translational research costs, an increase of $0.6 million
related to internal research support, as well as an increase of $1.0 million
related to other outside discovery costs and in vivo pharmacology costs,
partially offset by a $1.5 million decrease in expenses related to manufacturing
costs;

$0.7 million decrease in expenses related to our DB-020 program, driven primarily by decreased clinical trial costs due to ceasing enrollment in our Phase 1b clinical trial of DB-020 during the three months ended June 30, 2022;

$1.1 million increase in personnel-related costs due to increased headcount and wages within the research and development function, as well as increased stock-based compensation expense; and

$3.0 million net increase in other indirect research and development expenses,
driven primarily by a $1.2 million increase in expenses relating to internal
research, discovery efforts, and translational research around various other
preclinical programs, as well as a $1.6 million decrease in contra-research and
development expenses under the Regeneron Agreement. Included as reductions to
other indirect research and development expenses were $2.2 million and $3.8
million of contra-research and development expenses for the three months ended
June 30, 2022 and 2021, respectively, recognized pursuant to the Regeneron
Agreement.

General and Administrative Expense



General and administrative expenses for the three months ended June 30, 2022
were $5.9 million, compared to $4.9 million for the three months ended June 30,
2021. The increase of $1.0 million was primarily attributable to the following:

$0.5 million increase in professional fees, driven primarily by expenses related
to external legal services, as well as consulting, accounting advisory and audit
services; and

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$0.4 million increase in personnel-related costs primarily due to an increase in
headcount and wages within the general and administrative function, as well as
increased stock-based compensation expense.

Interest Income

The increase in interest income in the three months ended June 30, 2022 primarily consisted of increased interest income from our investments in available-for-sale securities.

Provision for Income Taxes



The provision for income taxes in the three months ended June 30, 2022, was due
to the recognition of an insignificant amount related to a foreign tax provision
and interest expense related to a previously established foreign uncertain tax
position.


Comparison of the six months ended June 30, 2022 and 2021



The following tables summarize our results of operations for each period
presented (in thousands):


                                               Six Months Ended June 30,
                                                 2022               2021         Change
Operating expenses:
Research and development                     $      18,707       $   12,847     $  5,860
General and administrative                          12,415            9,782        2,633
Total operating expenses                            31,122           22,629        8,493
Loss from operations                               (31,122 )        (22,629 )     (8,493 )
Other income:
Interest income                                        158              108           50
Total other income, net                                158              108           50
Net loss before provision for income taxes         (30,964 )        (22,521 )     (8,443 )
Provision for income taxes                             (98 )              -          (98 )
Net loss                                     $     (31,062 )     $  (22,521 )   $ (8,541 )

Research and Development Expenses

The following tables summarize our research and development expenses for each period presented (in thousands):




                                                    Six Months Ended June 30,
                                                    2022                2021            Change
DB-OTO                                          $      10,194       $       7,998          2,196
DB-020                                                    941               1,335           (394 )
Personnel-related (including stock-based
compensation)                                           6,751               4,546          2,205
Other indirect research and development
expenses                                                  821              

(1,032 ) 1,853 Total research and development expenses $ 18,707 $ 12,847 $ 5,860





Research and development expenses for the six months ended June 30, 2022 were
$18.7 million, compared to $12.8 million for the six months ended June 30, 2021.
The increase of $5.9 million was primarily attributable to the following:

$2.2 million increase in expenses incurred to advance our DB-OTO program, primarily attributable to an increase of $1.3 million in preparation for clinical trials and translational research costs, as well as an increase of $0.8 million related to external support for research and development consultants;

$0.4 million decrease in expenses related to our DB-020 program, driven primarily by decreased clinical trial costs due to ceasing enrollment in our Phase 1b clinical trial of DB-020 during the six months ended June 30, 2022;

$2.2 million increase in personnel-related costs due to increased headcount and wages within the research and development function, as well as increased stock-based compensation expense; and

$1.9 million net increase in other indirect research and development expenses,
driven primarily by a $1.1 million increase in expenses relating to internal
research and discovery efforts around various other preclinical programs, as
well as $0.5 million decrease in contra-research and development expenses under
the Regeneron Agreement. Included as reductions to other indirect research and
development expenses were $5.2 million and $5.7 million of contra-research and
development

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expenses for the six months ended June 30, 2022 and 2021, respectively, recognized pursuant to the Regeneron Agreement.

General and Administrative Expense



General and administrative expenses for the six months ended June 30, 2022 were
$12.4 million, compared to $9.8 million for the six months ended June 30, 2021.
The increase of $2.6 million was primarily attributable to the following:

$1.1 million increase in professional fees, driven primarily by expenses related
to external legal services, as well as consulting, accounting advisory and audit
services; and

$1.1 million increase in personnel-related costs primarily due to an increase in
headcount and wages within the general and administrative function, as well as
increased stock-based compensation expense.

Interest Income

The increase in interest income in the six months ended June 30, 2022 primarily consisted of increased interest income from our investments in available-for-sale securities.

Provision for Income Taxes



The provision for income taxes in the six months ended June 30, 2022, was due to
the recognition of $0.1 million related to a foreign tax provision and interest
expense related to a previously established foreign uncertain tax position.

Liquidity and Capital Resources

Sources of Liquidity and Capital



Since our inception, we have incurred significant operating losses and negative
cash flows from operations. We have not yet commercialized any of our product
candidates, which are in various phases of preclinical and clinical development,
and we do not expect to generate revenue from sales of any products for several
years, if at all. Through June 30, 2022, we funded our operations primarily from
net proceeds of $219.5 million from the issuance and sale of our convertible
preferred stock, $41.3 million from the Regeneron Agreement and $125.0 million
from the issuance and sale of our common stock in our IPO.

In March 2022, we filed a universal shelf registration on Form S-3 to register
for sale from time to time up to $200.0 million of common stock, preferred
stock, debt securities, warrants and/or units in one or more offerings. Further,
in March 2022, we entered into an Open Market Sale AgreementSM, or the Sales
Agreement, with Jefferies LLC, or Jefferies, pursuant to which, from time to
time, we may offer and sell shares of our common stock having an aggregate
offering price of up to $20.0 million. Sales of common stock through Jefferies
may be made by any method that is deemed an "at-the-market" offering as defined
in Rule 415(a)(4) under the Securities Act of 1933, as amended. Jefferies is
entitled to compensation at a rate equal to 3.0% of the gross proceeds from any
shares of common stock sold under the Sales Agreement. As of June 30, 2022, we
had not sold any shares of common stock pursuant to the Sales Agreement.

Cash Flows

The following table provides information regarding our cash flows for each period presented (in thousands):



                                                                Six Months 

Ended June 30,


                                                                 2022       

2021


Net cash provided by (used in):
Operating activities                                         $     (35,415 )     $    (21,955 )
Investing activities                                                55,447           (120,753 )
Financing activities                                                  (104 )          152,308
Net increase in cash, cash equivalents and restricted cash   $      19,928       $      9,600




Operating Activities

Our cash flows from operating activities are greatly influenced by our use of
cash for operating expenses and working capital requirements to support the
business. We have historically experienced negative cash flows from operating
activities as we invested in developing our pipeline, platform, drug discovery
efforts and related infrastructure. The cash used in operating activities
resulted

                                       33
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primarily from our net losses adjusted for non-cash charges, which are generally
attributable to stock-based compensation, depreciation and amortization and
accretion of discounts on available-for-sale securities, as well as changes in
components of operating assets and liabilities, which are generally attributable
to increased expenses, timing of vendor payments and performance under the
Regeneron Agreement.

During the six months ended June 30, 2022, net cash used in operating activities
of $35.4 million was primarily due to our net loss of $31.1 million as well as
changes in operating assets and liabilities of $8.1 million, partially offset by
net non-cash expenses of $3.8 million.

During the six months ended June 30, 2021, net cash used in operating activities
of $22.0 million was primarily due to our net loss of $22.5 million and changes
in operating assets and liabilities of $2.0 million, partially offset by net
non-cash expenses of $2.5 million.

Investing Activities



During the six months ended June 30, 2022, net cash provided by investing
activities of $55.4 million was primarily due to maturities and redemptions of
available for sale securities of $94.9 million, partially offset by purchases of
available-for-sale securities of $39.3 million and purchases of property and
equipment of $0.2 million.

During the six months ended June 30, 2021, net cash used in investing activities
of $120.8 million was primarily due to purchases of available-for-sale
securities of $147.2 million and purchases of property and equipment of $0.1
million, partially offset by maturities of available-for-sale securities of
$26.5 million.

Financing Activities

During the six months ended June 30, 2022, net cash used in financing activities of $0.1 million consisted of principal payments on our finance lease liability.



During the six months ended June 30, 2021, net cash provided by financing
activities of $152.3 million consisted primarily of proceeds from the issuance
and sale of common stock, net of cash paid for offering costs, in connection
with our IPO of $125.0 million and proceeds from the issuance and sale of our
Series D convertible preferred stock of $27.4 million, net of cash paid for
offering costs.

Funding Requirements



We expect our expenses to increase substantially in connection with our ongoing
research and development activities, particularly as we advance the preclinical
activities and clinical trials of our product candidates. In addition, we expect
to continue to incur additional costs associated with operating as a public
company. As a result, we expect to incur substantial operating losses and
negative operating cash flows for the foreseeable future.

As of June 30, 2022, we had cash, cash equivalents and available-for-sale
securities of $125.6 million. We believe that our cash, cash equivalents and
available-for-sale securities will enable us to fund our operating expenses and
capital expenditure requirements into 2024. We have based this estimate on
assumptions that may prove to be wrong, and we could exhaust our available
capital resources sooner than we anticipate.

Because of the numerous risks and uncertainties associated with product
development, and because the extent to which we may enter into collaborations
with third parties for the development of our product candidates is unknown, we
may incorrectly estimate the timing and amounts of increased capital outlays and
operating expenses associated with completing the research and development of
our product candidates. Our funding requirements and timing and amount of our
operating expenditures will depend on many factors, including, but not limited
to:

the progress, costs and results of our ongoing preclinical development, our planned Phase 1/2 clinical trial of DB-OTO and any future clinical development of DB-OTO;

the approach we determine for the advancement of DB-020, including further potential clinical development;

the scope, progress, costs and results of preclinical and clinical development for our other product candidates and programs, including AAV.103, AAV.104, AAV.201 and DB-ATO;

the number of, and development requirements for, other product candidates that we may identify and develop;

the scope, costs, timing and outcome of regulatory review of our product candidates;


                                       34
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the cost and timing of completion of commercial-scale manufacturing activities;

the success of our collaboration with Regeneron;

the payment or receipt of milestones and of other collaboration-based revenues, if any;

our ability to establish and maintain additional strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;

the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

the amount and timing of revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;


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

the extent to which we may acquire or in-license other products, product candidates and technologies;

the impacts of the COVID-19 pandemic;

the ability to receive additional non-dilutive funding, including grants from organizations and foundations; and

the costs of operating as a public company.



Identifying potential product candidates and conducting preclinical testing and
clinical trials 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 be derived from sales of products that we do
not expect to be commercially available for several years, if ever. Accordingly,
we will need to obtain substantial additional funds to achieve our business
objectives.

Our expectation 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 management 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.

Adequate additional funds may not be available to us on acceptable terms, or at
all. We do not have any committed external source of funds, other than amounts
we are entitled to under the Regeneron Agreement. As of June 30, 2022, we had
$10.0 million of unbilled receivables from Regeneron, reflecting the amount owed
for Regeneron's one-year extension of the research term under the Regeneron
Agreement. Market volatility resulting from the COVID-19 pandemic or other
factors could also adversely impact our ability to access capital as and when
needed. To the extent that we raise additional capital through the sale of
equity or convertible debt securities, the ownership interests of our
stockholders will be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect the rights of holders of
our common stock. Additional 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
capital expenditures or declaring dividends and may require the issuance of
warrants, which could potentially dilute the ownership interests of holders of
our common stock.

We may be unable to raise additional funds or enter into other collaborations,
strategic alliances or licensing arrangements with third parties when needed on
favorable terms, or at all. If we are unable to raise additional funds through
equity or debt financings or enter into such agreements when needed, we may have
to significantly delay, reduce or eliminate some or all of 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 or on terms that may not be favorable to us.

Material Cash Requirements

There have been no material changes to our material cash requirements described in our 2021 Annual Report on Form 10-K.

Critical Accounting Estimates and Significant Judgments



Our management's discussion and analysis of our financial condition and results
of operations is based on our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these condensed consolidated
financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the condensed consolidated financial
statements, as well as the reported expenses incurred during the reporting
periods. Our estimates are based on our historical experience and on various
other factors that we believe are reasonable under the circumstances, the
results

                                       35
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of which form the basis for making judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting estimates from those described in our 2021 Annual Report on Form 10-K.

Emerging Growth Company and Smaller Reporting Company Status



We are an "emerging growth company" as defined in the Jumpstart Our Business
Startups Act, or the JOBS Act, enacted in April 2012. As a result, we may take
advantage of reduced reporting requirements that are otherwise applicable to
public companies. In particular, 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. We have elected not to "opt out" of such
extended transition period, which means that when a standard is issued or
revised and it has different application dates for public or private companies,
we can adopt the new or revised standard at the time private companies adopt the
new or revised standard and may do so until such time that we either (1)
irrevocably elect to "opt out" of such extended transition period or (2) no
longer qualify as an emerging growth company.

We are also a "smaller reporting company" as defined in Rule 12b-2 under the
Securities and Exchange Act of 1934, as amended. We may continue to be a smaller
reporting company if either (i) the market value of our shares held by
non-affiliates is less than $250 million or (ii) our annual revenue was less
than $100 million during the most recently completed fiscal year and the market
value of our shares held by non-affiliates is less than $700 million. If we are
a smaller reporting company at the time we cease to be an emerging growth
company, we may continue to rely on exemptions from certain disclosure
requirements that are available to smaller reporting companies.

Recently Issued Accounting Pronouncements



We have reviewed all recently issued accounting pronouncements and have
determined that, other than as disclosed in Note 2 to our consolidated financial
statements included in our 2021 Annual Report on Form 10-K, such standards will
not have a material impact on our financial statements or do not otherwise apply
to our current operations.

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