You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the unaudited consolidated financial information and the notes thereto included in this Quarterly Report on Form 10-Q and with our audited consolidated financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 3, 2022, or the Annual Report on Form 10-K. In addition, you should read the "Risk Factors" and "Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are an advanced, late clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of targeted antibacterial products that address high unmet medical needs to treat serious infections caused by multidrug-resistant pathogens. On February 1, 2022, our Board of Directors received a preliminary, non-binding proposal from our majority stockholder, Innoviva Inc., or Innoviva, to acquire all the outstanding equity securities of the Company that are not currently owned by Innoviva for a per share consideration of $1.80, payable in cash. On March 15, 2022 Innoviva revised its non-binding offer to acquire the Company to increase the purchase thereunder to $2.00 per share in cash. All other terms of the offer remain unchanged. The offer letter and amended offer letter delivered by Innoviva to our Board of Directors are publicly available in the Schedule 13D amendments dated February 1, 2022 and March 15, 2022, respectively, filed by Innoviva with the SEC. Our Board of Directors, which does not include any members appointed by or affiliated with Innoviva, has retained MTS Health Partners, L.P. and Covington & Burling, LLP to explore alternatives and to assist the Board of Directors in its evaluation of the proposal consistent with its fiduciary duties.

Our lead product candidate, sulbactam-durlobactam, or SUL-DUR, is an intravenous, or IV, combination of sulbactam, an IV ?-lactam antibiotic, and durlobactam, a novel broad-spectrum IV ?-lactamase inhibitor, or BLI, that we are developing for the treatment of pneumonia and bloodstream infections caused by carbapenem-resistant Acinetobacter baumannii, or Acinetobacter. Based on current carbapenem resistance rates, we estimate there are in excess of 250,000 hospital-treated carbapenem-resistant Acinetobacter infections annually across the United States, Europe, the Middle East and China for which significant morbidity and mortality exists due to limited treatment options. We initiated ATTACK (Acinetobacter Treatment Trial Against Colistin), our single Phase 3 registrational trial in 2019, and announced positive top-line Phase 3 data in October 2021 demonstrating that the primary efficacy and safety objectives had been achieved. Specifically, the results indicated non-inferiority in 28-day all-cause mortality in patients with carbapenem-resistant Acinetobacter infections and a statistically significant higher clinical cure rate compared to colistin. SUL-DUR also had a favorable safety profile when compared to colistin with a statistically significant reduction in nephrotoxicity. Based on the success of ATTACK and the totality of the SUL-DUR preclinical and clinical data, we also announced our intention to file a new drug application, or NDA, with the U.S. Food & Drug Administration, or FDA, in mid-2022. SUL-DUR has been awarded Fast Track status designation providing potential eligibility for accelerated approval and priority review, if relevant criteria are met, following acceptance of our submission by the FDA. With the support of our partner Zai Lab (Shanghai) Co., Ltd. or Zai Lab (Nasdaq: ZLAB), we enrolled approximately 25% of the ATTACK trial in China and combined with the strength of the overall SUL-DUR data set, we believe the data will also support a regulatory submission in China. Zai Lab has an exclusive license to develop and commercialize SUL-DUR in mainland China as well as the broader Asia-Pacific region.

Our second late-stage product candidate, zoliflodacin, is a novel orally administered molecule being developed for the treatment of uncomplicated gonorrhea. The bacterial pathogen responsible for gonorrhea is Neisseria gonorrhoeae, or N. gonorrhoeae, including multidrug-resistant strains. Intramuscular injections of ceftriaxone now represent the only U.S. Centers for Disease Control and Prevention, or CDC, recommended treatment option for the estimated 1.6 million annual cases of gonorrhea in the United States. We believe there is a growing unmet need for a single-dose oral antibiotic that will reliably treat patients with gonorrhea, including infections caused by multidrug-resistant strains of N. gonorrhoeae, which are emerging globally. The Phase 3 registrational trial, initiated in September 2019, is sponsored by our nonprofit collaborator, the Global Antibiotic Research and Development Partnership, or

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GARDP, which as the sponsor is also responsible for all Phase 3 clinical trial and pharmaceutical development expenses. GARDP has commercial rights to zoliflodacin in up to 168 low- and select middle-income countries, while Entasis retains commercial rights in the major markets in North America, Europe and Asia-Pacific. Based on current enrollment rates, we anticipate the trial to be fully enrolled in 2023.

Our third product candidate is ETX0282CPDP which is a combination of a novel, oral BLI, ETX0282, with cefpodoxime proxetil or CPDP, which has the potential to address complicated urinary tract infections, or cUTIs, including those caused by multidrug-resistant Enterobacteriaceae. We believe there is a significant unmet need for new oral antibiotics to reliably treat the estimated 3 to 4 million patients diagnosed annually with cUTIs. We have reported preliminary Phase 1 trial results, and we are now seeking a partner to help further advance ETX0282CPDP through additional clinical trials. This program was previously supported by the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator program, or CARB-X.

We are also advancing the development of a novel class of antibiotics, non ?-lactam inhibitors of penicillin-binding proteins, or NBPs. We believe NBPs constitute a potential new class of Gram-negative antibacterial agents that are designed to target a broad spectrum of multidrug resistant bacterial pathogens that overcome the main source of ?-lactam resistance which is driven by ?-lactamase activity. This novel class of agents is designed to potentially target a broad spectrum of multidrug resistant bacterial pathogens that are part of the CDC/World Health Organization, or WHO, list of high unmet medical need or ESKAPE pathogens. We selected ETX0462 as the initial clinical candidate for this program and with support from CARB-X we are currently working to complete additional pre-clinical activities to enable the program to advance into a Phase 1 clinical trial. In June 2020, we were awarded a contract from the National Institutes of Health, or NIH, to support research towards developing additional NBP molecules with expanded Gram-negative spectrum from this novel class. This research program, designated NBP2, is attempting to target Klebsiella, Pseudomonas and E. coli from the ESKAPE list of pathogens. In July 2021, we successfully completed the first milestones for the program and have been awarded the Option 1 Period of the program to proceed with further optimization, beginning August 1, 2021. Subject to achieving pre-defined milestones, the contract is expected to sufficiently fund activities to achieve submission of an Investigational New Drug, or IND, application to the FDA.

Since our inception in May 2015, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, discovering product candidates and securing related intellectual property rights, conducting discovery and development activities for our programs and planning for potential commercialization. We do not have any products approved for sale and have not generated any revenue from product sales. As of March 31, 2022, we have funded our operations primarily with net cash proceeds of $104.2 million from the sale of our preferred stock, net cash proceeds of $65.6 million from the sale of common stock in our initial public offering, and net cash proceeds of $93.5 million from the sale of common stock, warrants and pre-funded warrants in private placements, at-the-market sales and the issuance of a convertible note. We have also either directly received funding or financial commitments from, or have had our program activities conducted and funded by, the U.S. government through our arrangements with NIAID, CARB-X, and the U.S. Department of Defense, or DOD, and we have received non-profit awards from GARDP and upfront and milestone payments from our license and collaboration agreement with Zai Lab.

Funding Arrangements

NIH

In June 2020, we entered into a contract with NIAID, part of the NIH, with an effective date of July 1, 2020. The contract consists of an initial award of approximately $3.0 million, with the potential to increase it up to $15.5 million, that will be used to develop novel molecules from our NBP platform. In July 2021, we successfully completed the first milestones for the program associated with the initial award and have been awarded the Option 1 Period of the program to proceed with further optimization, beginning August 1, 2021. This option consists of an additional $2.9 million, bringing the total award to $5.9 million. Funding from the contract will support research towards developing molecules with expanded Gram-negative spectrum against antibiotic-resistant bacterial pathogens including E. coli, Acinetobacter, Pseudomonas and Klebsiella. Through March 31, 2022, we had received $3.9 million in payments and we had recorded $4.5 million of grant income under this funding arrangement.

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CARB-X

In March 2017 and October 2017, we entered into funding arrangements with the Trustees of Boston University to utilize funds from the U.S. government, through the CARB-X program, for support of our ETX0282CPDP and ETX0462 programs. These funding arrangements could cover up to $18.5 million of our specified research expenditures from April 2017 through May 2023. Through March 31, 2022, we had received $12.6 million in payments and we have recorded $13.0 million of grant income under these funding arrangements. The remaining $5.9 million of grant income that could be recorded is related to our ETX0462 program.

License and Collaboration Agreements

GARDP

In July 2017, we entered into a collaboration agreement with GARDP for the development and commercialization of a product candidate containing zoliflodacin in certain countries. Under the terms of the collaboration agreement, GARDP will fully fund the ongoing Phase 3 registrational trial, including the manufacture and supply of the product candidate containing zoliflodacin, in uncomplicated gonorrhea.

Zai Lab

In April 2018, we entered into a license and collaboration agreement with Zai Lab pursuant to which Zai Lab licensed exclusive rights to durlobactam and SUL-DUR in the Asia-Pacific region. Under the terms of the agreement, Zai Lab will fund most of our registrational trial costs in China for SUL-DUR, with the exception of a Phase 3 patient drug supply of licensed product. As of March 31, 2022, we have received net payments of $15.8 million, representing the $5.0 million upfront payment, $7.0 million of milestone payments, $0.6 million of research support payments and $5.9 million of certain other reimbursable registrational trial costs, less applicable taxes of $2.2 million, from Zai Lab and we have recognized revenue of $12.0 million under this agreement.

Components of Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our product discovery efforts and the development of our preclinical and clinical product candidates. These expenses include:

employee-related expenses, including salaries and benefits, travel and

? stock-based compensation expense for employees engaged in research and

development functions;

? fees paid to consultants for services directly related to our product

development and regulatory efforts;

expenses incurred under agreements with contract research organizations, or

? CROs, as well as contract manufacturing organizations, or CMOs, and consultants

that provide supporting activities for our preclinical studies, clinical trials

and NDA filing and approval efforts;

? costs associated with preclinical activities and development activities;

? costs related to compliance with regulatory requirements; and

? facilities-related expenses, which include allocated rent and maintenance of

facilities and other operating costs.

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Costs associated with research and development activities are expensed as incurred. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or other information provided to us by our vendors. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered.

Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and preclinical program and consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and central laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under service, license or option agreements. We do not allocate employee costs or facility expenses to specific programs for financial reporting purposes because these costs are deployed across multiple programs and, accordingly, are not separately classified. We primarily use internal resources and our own employees to conduct our research and discovery as well as for managing our preclinical development, process development, manufacturing and clinical development activities.

To date, substantially all of our research and development expenses have been related to the preclinical and clinical development of our product candidates and preclinical programs. The following table shows our research and development expenses by development program and type of activity for the three months ended March 31, 2022 and 2021:

                                                            Three Months Ended
                                                                March 31,
                                                             2022         2021

                                                              (in thousands)
Direct research and development expenses by program:
SUL-DUR                                                   $     5,639    $ 4,030
ETX0462                                                            95      1,192
ETX0282CPDP                                                         4         60
Zoliflodacin                                                        -          -
Other preclinical programs                                        637        216

Unallocated research and development expenses: Personnel related (including stock-based compensation) 4,005 3,337 Facilities, supplies and other

                                    612        535
Total research and development expenses                   $    10,992    $ 9,370

Research and development activities are central to our business model. 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 and duration of later-stage clinical trials. It is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.

The duration, costs and timing of clinical trials and development of our product candidates and preclinical program will depend on a variety of factors that include, but are not limited to, the following:

? the impact of COVID-19 on hospitals participating in the trials and their

ability to focus on and direct resources to our trials;

? the number of trials required for approval and any requirement for extension

   trials;


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 ? 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 profiles of the product candidates.

Any changes in the outcome of any of these factors with respect to the development of our product candidates could mean a significant change in the costs and timing associated with the development of these product candidates. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing and supply, and commercial viability. We will determine which programs to pursue and how much to fund each program based on the scientific and clinical success of each product candidate, as well as an assessment of each candidate's commercial potential.

General and Administrative Expenses

General and administrative expenses consist of salaries and benefits and stock-based compensation expense for personnel in executive, finance and administrative functions. General and administrative costs also include facilities-related costs not otherwise included in research and development expenses and professional fees for legal, patent, consulting, accounting, insurance and audit services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research, development and commercialization activities of our product candidates. Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and other employee-related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing functions for that product candidate.

Other Income, Net

Grant Income

Grant income consists of income recognized in connection with grants we received under our funding arrangements with the Trustees of Boston University through the CARB-X program, as well as amounts received under our NIH contract. Grant income is recognized in the period during which the related specified expenses are incurred.

Interest Income

Interest income consists of interest earned on our cash and investment balances, which are primarily held in money market funds and U.S. Treasury Securities.

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Interest Expense

Interest expense consists of interest expense related to our convertible note.

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the periods
presented:

                                 Three Months Ended March 31,
                                   2022                2021           $ Change

                                               (in thousands)
Operating expenses:
Research and development      $        10,992     $         9,370     $   1,622
General and administrative              4,936               3,307         1,629
Total operating expenses               15,928              12,677         3,251
Loss from operations                 (15,928)            (12,677)       (3,251)
Other income, net:
Grant income                              672               1,972       (1,300)
Interest income                             4                   4             -
Interest expense                         (10)                   -          (10)
Total other income, net                   666               1,976       (1,310)
Net loss                      $      (15,262)     $      (10,701)     $ (4,561)

Research and Development Expenses

Research and development expenses were $11.0 million during the three months ended March 31, 2022, compared to $9.4 million during the three months ended March 31, 2021. The increase of $1.6 million was primarily due to an increase of $1.6 million in expenses related to our SUL-DUR product candidate, an increase of $0.7 million in personnel expenses and an increase of $0.4 million in other preclinical programs, partially offset by a decrease of $1.1 million in expenses related to our ETX0462 product candidate. The increase of $1.6 million in expenses related to our SUL-DUR product candidate was primarily due to an increase of $3.2 million in manufacturing costs and an increase of $1.0 million in NDA support, partially offset by a decrease of $2.6 million in clinical trial costs. The decrease of $1.1 million in expenses related to our ETX0462 product candidate was due to a decrease of $1.1 million in manufacturing costs.

General and Administrative Expenses

General and administrative expenses were $4.9 million during the three months ended March 31, 2022, compared to $3.3 million during the three months ended March 31, 2021. The increase of $1.6 million was driven primarily by increases of $1.1 million in consulting costs, $0.4 million in legal costs and $0.1 million in investor and public relations costs.

Other Income, Net

Other income, net was $0.7 million during the three months ended March 31, 2022, compared to $2.0 million during the three months ended March 31, 2021. The decrease of $1.3 million was primarily due to a decrease of $1.3 million in grant income associated with our agreements with CARB-X and NIH.

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Liquidity and Capital Resources

Overview

As of March 31, 2022, we had cash and cash equivalents of $33.5 million. We have funded our operations to date with the proceeds from equity securities offerings and the issuance of a convertible promissory note. In addition, we also have received funding or financial commitments from, or have had our program activities conducted and funded by, the U.S. government through arrangements with NIAID, CARB-X, NIH and the U.S. Department of Defense, and have received non-profit awards from GARDP and upfront milestone and cost reimbursement payments from Zai Lab.

Going Concern

Since our inception, we have incurred recurring losses and negative cash flows from operations. Our net loss was $15.3 million for the three months ended March 31, 2022 and $47.1 million for the year ended December 31, 2021. As of March 31, 2022, we had an accumulated deficit of $246.9 million. We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the necessary development, obtaining regulatory approval and preparing for potential commercialization of our product candidates. Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements through the third quarter of 2022.

These conditions and events raise substantial doubt about our ability to continue as a going concern for one year following the issuance of our consolidated financial statements for the quarter ended March 31, 2022. To finance our operations beyond this point, we will need to raise substantial additional capital or effectively implement cost reductions, neither of which can be assured. To the extent that we raise additional capital through future equity offerings, the ownership interest of common stockholders could be further diluted and such dilution may be significant. If we are not able to secure adequate additional funding in future periods, we may make reductions in certain expenditures, which may include suspending or curtailing planned activities and delaying, or reducing the scope of, suspending or eliminating one or more research and development programs or commercialization efforts. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the consolidated financial statements have been prepared on a basis that assumes we will continue as a going concern and that contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Funding Requirements

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, laboratory and related supplies, manufacturing development costs, legal and other regulatory expenses and general administrative costs.

The successful development of our product candidates is highly uncertain. 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 clinical development of our product candidates and obtain regulatory approvals. We are also unable to predict when, if ever, net cash inflows will commence from product sales. This is due to the numerous risks and uncertainties associated with developing drugs, including, among others, the uncertainty of:

? the unpredictable duration and economic impact of the COVID-19 pandemic;

? successful enrollment in, and completion of clinical trials;

performing preclinical studies and clinical trials in compliance with

? requirements of the FDA, the European Medicines Agency, or EMA, or any

comparable regulatory authority;

? the ability of collaborators to manufacture sufficient quantity of product for

development, clinical trials or potential commercialization;

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obtaining marketing approvals with labeling for sufficiently broad patient

? populations and indications, without unduly restrictive distribution

limitations or safety warnings, such as black box warnings or a risk evaluation

and mitigation strategies program;

? obtaining and maintaining patent, trademark and trade secret protection and

regulatory exclusivity for our product candidates;

? making arrangements with third parties for manufacturing capabilities;

? launching commercial sales of products, if and when approved, whether alone or

in collaboration with others;

? acceptance of the therapies, if and when approved, by physicians, patients and

third-party payors;

? competing effectively with other therapies;

? obtaining and maintaining healthcare coverage and adequate reimbursement;

? protecting our rights in our intellectual property portfolio; and

? maintaining a continued acceptable safety profile of our drugs following

approval.

A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.

We will not generate revenue from product sales unless and until we or a collaborator successfully complete clinical development and obtain regulatory approval for our current and future product candidates. If we obtain regulatory approval for any of our product candidates that we ultimately decide to commercialize on our own, we will incur significant expenses related to commercialization, including developing our internal commercialization capability to support product sales, marketing and distribution.

As a result, we will need substantial additional funding to support our continuing operations and to pursue our growth strategy. Until such time, if ever, when we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings and potential collaboration, license and development agreements. 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.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to a third party to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our failure to raise capital as and when needed would compromise our ability to pursue our business strategy.

We will also continue to incur costs as a public company that we did not incur or incurred at lower rates prior to our initial public offering, including increased fees payable to the nonemployee members of our board of directors, increased personnel costs, increased director and officer insurance premiums, audit and legal fees, investor relations fees and expenses for compliance with public-company reporting requirements under the Exchange Act and rules implemented by the SEC and Nasdaq.

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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 or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

Innoviva, Inc. Securities Purchase Agreements

On February 1, 2022, our Board of Directors received a preliminary, non-binding proposal from Innoviva to acquire all the outstanding equity securities of the Company that are not currently owned by Innoviva for a per share consideration of $1.80 payable in cash. On March 15, 2022, Innoviva revised its non-binding offer to acquire the Company to increase the per share consideration to $2.00. All other terms of the offer remain unchanged. The offer letters delivered by Innoviva to our Board of Directors are publicly available in the Schedule 13D amendments dated February 1, 2022 and March 15, 2022, filed by Innoviva with the SEC. Our Board of Directors, which does not include any members appointed by or affiliated with Innoviva, has retained MTS Health Partners, L.P. and Covington & Burling LLP to explore alternatives and to assist the board of directors in its evaluation of the proposal consistent with fiduciary duties.

On February 17, 2022, we entered into a securities purchase agreement, or the Fourth Securities Purchase Agreement, with a subsidiary of Innoviva, pursuant to which we issued and sold to Innoviva, in a private placement which closed on February 18, 2022, a convertible promissory note having a principal amount of $15.0 million, or the Convertible Note. The Convertible Note is convertible at maturity at the election of us or Innoviva into shares of our common stock at a conversion price of $1.48 per share of common stock and warrants to purchase an equal number of shares of common stock with an exercise price of $1.48 per share of common stock, or the Warrants. As of March 31, 2022, the Convertible Note was convertible into 10,141,852 shares of common stock and 10,141,852 Warrants. The Convertible Note will also be convertible at the option of Innoviva if we engage in certain capital markets transactions, asset sales or royalty transactions. If we are acquired prior to the maturity date of the Convertible Note, the Convertible Note will be payable in cash at the time of such acquisition. The Convertible Note will mature on August 18, 2022 and bears interest at a rate of 0.59% per annum to, but excluding, the date of repayment or conversion of the Convertible Note. From and including the date of maturity, if not converted, the Convertible Note will bear interest at a rate of 10.00% per annum to, but excluding, the date of repayment or conversion of the Convertible Note.

The Convertible Note and the Warrants will have provisions that preclude conversion or exercise, respectively, if such conversion or exercise would result in the issuance of more than 19.99% of our currently outstanding common stock in the aggregate prior to obtaining stockholder approval.

Registration Rights Agreement

On February 18, 2022, we and Innoviva entered into a registration rights agreement, or the Registration Rights Agreement, pursuant to which, among other things, we must prepare and file with the Securities and Exchange Commission, or the SEC, a registration statement with respect to the resale of shares of common stock and the warrants issuable upon conversion of the Convertible Note and shares of common stock issuable upon exercise of the Warrants within 90 days of the Fourth Securities Purchase Agreement.

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Cash Flows

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

                                                           Three Months Ended
                                                               March 31,
                                                           2022          2021
Net cash used in operating activities                   $ (13,751)    $ (10,099)
Net cash used in investing activities                          (9)          (11)
Net cash provided by financing activities                   15,000         1,800

Net increase (decrease) in cash and cash equivalents $ 1,240 $ (8,310)

Operating Activities

During the three months ended March 31, 2022, operating activities used $13.8 million of cash, resulting from our net loss of $15.3 million, offset by net cash provided by changes in operating assets and liabilities of $0.8 million, and non-cash charges of $0.7 million. Net cash provided by changes in operating assets and liabilities for the three months ended March 31, 2022 consisted a $1.3 million decrease in prepaid expenses, a $0.6 million increase in accounts payable, a $0.1 million increase in other assets and a $0.1 million decrease in grants receivable. These were partially offset by a $1.2 million decrease in accrued expenses and other liabilities.

During the three months ended March 31, 2021, operating activities used $10.1 million of cash, resulting from our net loss of $10.7 million and net cash used by changes in operating assets and liabilities of $0.3 million, offset by non-cash charges of $0.9 million. Net cash used by changes in operating assets and liabilities for the three months ended March 31, 2021 consisted primarily of a $0.7 million increase in grants receivable, a $0.5 million decrease in accrued expenses and other liabilities, a $0.4 million increase in other assets and a $0.2 million decrease in accounts payable. These were partially offset by a $1.4 million decrease in prepaid expenses.

Investing Activities

During the three months ended March 31, 2022, net cash used in investing activities was $9,000, consisting of purchases of property, plant, and equipment.

During the three months ended March 31, 2021, net cash used in investing activities was $11,000, consisting of purchases of property, plant, and equipment.

Financing Activities

During the three months ended March 31, 2022, net cash provided by financing activities was $15.0 million, which consisted of proceeds from the issuance of our convertible note.

During the three months ended March 31, 2021, net cash provided by financing activities was $1.8 million, which consisted of proceeds from the exercise of warrants.

Critical Accounting Policies, Recent Accounting Pronouncements and Significant Judgments and Estimates

There have been no significant changes to our critical accounting policies from those described in "Management's Discussion and Analysis of Financial Condition and Results of Operations," disclosed in our most recent Annual Report on Form 10-K.

Refer to Note 2, Summary of Significant Accounting Policies, in the accompanying notes to our unaudited consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

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Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

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