The following information should be read in conjunction with the unaudited consolidated financial information and the notes thereto included in this Quarterly Report on Form 10-Q. The following disclosure contains forward-looking statements that involve risk and uncertainties. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed in our Annual Report on Form 10-K.
Overview
We are a biopharmaceutical company that seeks to discover and develop novel cancer immunotherapies using our ATLASTM proprietary discovery platform. The ATLAS platform profiles each patient's CD4+ and CD8+ T cell immune responses to every potential target or "antigen" in that patient's tumor. We believe that this approach optimizes antigen selection for immunotherapies such as cancer vaccines and cellular therapies by identifying the antigens to which the patient can respond. Consequently, we believe that ATLAS could lead to more immunogenic and efficacious cancer immunotherapies. Our most advanced program is GEN-009, a personalized neoantigen cancer vaccine, for which we are conducting a Phase 1/2a clinical trial. The GEN-009 program uses ATLAS to identify neoantigens, or immunogenic tumor mutations unique to each patient, for inclusion in each patient's GEN-009 vaccine. We are also advancing GEN-011, a neoantigen-specific adoptive T cell therapy program that also relies on ATLAS. InSeptember 2020 , we received notice from theU.S. Food and Drug Administration ("FDA") that it has accepted our Investigational New Drug ("IND") Application for GEN-011 to initiate a Phase 1/2a clinical trial. We are currently initiating clinical sites for our GEN-011 program.
ATLAS Platform
Harnessing and directing the T cell arm of the immune system to kill tumor cells is increasingly viewed as having potential in the treatment of many cancers. This approach has been effective against hematologic malignancies and, more recently, certain solid tumors. Vaccines or cellular therapies employing this approach must target specific differences from normal tissue present in a tumor, such as antigens arising from genetic mutations. However, the discovery of optimal antigens for such immunotherapies has been particularly challenging for two reasons. First, the genetic diversity of human T cell responses means that effective antigens vary from person to person. Second, the number of candidate antigens can be very large, with up to thousands of candidates per patient in some cancers. An effective antigen selection system must therefore account both for each patient's tumor and for their T cell repertoire. ATLAS achieves effective antigen selection by employing components of the T cell arm of the human immune system from each patient. Using ATLAS, we can measure each patient's T cell responses to a comprehensive set of candidate neoantigens, tumor-associated antigens and tumor-associated viral antigens for their own cancer, allowing us to select those targets associated with the anti-tumor T cell responses that may kill that individual's cancer. We believe that ATLAS represents the most comprehensive and accurate system for antigen discovery. Further, we believe ATLAS identifies a novel candidate antigen profile, that of inhibitory T cell responses. Previously, all candidate antigens were thought either to be targets of effective anti-tumor responses (stimulatory), or irrelevant. However, using ATLAS, we have identified inhibitory antigens we call InhibigensTM, which are shown to promote tumor progression in preclinical studies. We have also discovered that an antigen can be stimulatory in one patient and inhibitory in another, reinforcing the importance of selecting each patient's potentially immunogenic antigens. The ATLAS portfolio comprises seven patent families and potentially two additional patent families. The first two families are comprised of issuedU.S. patents, with patent terms until at least 2030, as well as granted foreign patents and pendingU.S. and foreign applications. The third family is directed to ATLAS-based methods for cancer diagnosis, prognosis and patient selection, as well as related compositions. This patent family is comprised of pending applications in eleven foreign jurisdictions and an allowedU.S. application. Patents issuing from these applications are expected to have a patent term until at least 2038. The four further families and two potential additional families currently comprise PCT applications or provisional applications, and are directed to various methods using ATLAS-identified antigens, to dose regimen for GEN-009, and to our cell-based therapy GEN-011. 21
--------------------------------------------------------------------------------
Our Immuno-Oncology Programs
Our cancer immunotherapies include a vaccine that is designed to educate T cells to recognize and attack specific cancer targets, and a cellular therapy intended to introduce T cells that have been educated to attack these targets. We believe that neoantigen vaccines could be used in combination with existing treatment approaches for cancer to potentially direct and enhance an individual's T cell response to his or her cancer, thereby potentially effecting better clinical outcomes. We also believe that isolating and expanding T cell populations targeting specific neoantigens through adoptive cell therapy could provide meaningful clinical benefit.
The following describes our active immuno-oncology programs in development:
Discovery Pre-IND Phase 1/2a Pivotal Status &
Anticipated Milestones
GEN-009 Neoantigen vaccine ð • ASCO 2019 Top 10 IO abstract • Remaining patients data expected in Q4 2020 GEN-011 Neoantigen cell therapy ð • Initiated phase I/IIa clinical trial Toolbox
of novel assets to enable additional programs
Shared neoantigens Tumor-associated antigens Viral cancer
antigens
Our lead program, GEN-009, is an adjuvanted neoantigen peptide vaccine candidate. Using ATLAS to identify specific neoantigens, we manufacture a personalized vaccine for each patient using only those neoantigens determined by ATLAS to be stimulatory to that patient's anti-tumor immune responses. We are currently conducting a Phase 1/2a clinical trial for GEN-009 across a range of solid tumor types: •Part A of the trial is assessing the safety and immunogenicity of GEN-009 as monotherapy in certain cancer patients with no evidence of disease; and •Part B of the trial is assessing the safety, immunogenicity, and preliminary antitumor activity of GEN-009 in combination with ICI therapy in patients with advanced or metastatic tumors. The patients in Part A of the trial had little to no detectable tumor at the time of vaccination with GEN-009, but were still at risk of relapse. In the data from the eight dosed patients we observed the following: •100% of patients had measurable CD4+ and CD8+ T cell responses to their GEN-009 vaccine; •Responses were detected against 99% of the administered vaccine neoantigens (N=88 administered antigens), a response rate in excess of that which has been reported previously by others in response to candidate neoantigen vaccines; •GEN-009 elicited CD8+ T cell responses ex vivo, which is a measure of T cell effector function, for 41% of vaccine neoantigens and CD4+ T cell responses to 51% of neoantigens; •GEN-009 elicited broad immune responses using an in vitro stimulation assay, which is a measure of central memory responses, with 87% of neoantigens eliciting a CD4+ response and 57% of neoantigens eliciting a CD8+ response; •GEN-009 was well tolerated, with no dose-limiting toxicities observed; and •ThroughOctober 8, 2020 , only one of the eight vaccinated patients has developed a recurrence of their tumor.
In Part B of the GEN-009 trial we continue to see immune responses including:
•Antigen-specific CD4+ and CD8+ T cell responses; •Responses to multiple antigens in each patient, measured through both ex vivo and in vitro stimulation assays; and •Strong magnitude of response.
We believe the above data confirms the potential antigen selection advantages of ATLAS.
22 -------------------------------------------------------------------------------- We also disclosed Part B data demonstrating evidence that GEN-009 can provide clinical benefit to patients taking checkpoint inhibitor (CPI) therapy. Among the first five patients for whom post-vaccination tumor scans were available, three patients' tumors achieved independent RECIST™ criteria responses. We believe this novel signal is consistent with a GEN-009-driven benefit to patients receiving CPIs. We intend to report longer-term data from these patients and initial data from a larger patient cohort during the fourth quarter of 2020. We have completed initial enrollment in our GEN-009 Part B trial. We believe that the current patients enrolled are sufficient to determine whether a preliminary clinical signal can be seen. Therefore, we have paused enrollment in our GEN-009 Part B trial. Upon review of the clinical results, including longer term follow-up, we will consider whether it is appropriate to continue the study. We also are advancing GEN-011, an adoptive T cell therapy specific for neoantigens identified by ATLAS. Adoptive T cell therapies offer an alternative treatment in solid tumors. GEN-011 extracts and specifically expands ATLAS-identified neoantigen-specific T cells from each patient's peripheral blood. InSeptember 2020 , we received notice from the FDA that it has accepted our IND Application for GEN-011 to initiate a Phase 1/2a clinical trial. We are currently initiating sites for this clinical trial. We continue to conduct research, principally to explore InhibigenTM biology and ways to further strengthen ATLAS. We also continue to explore additional program opportunities. The COVID-19 pandemic has affected our ability to continue such efforts, however, so we cannot provide specific timelines for these efforts to translate into new clinical candidates, which might include non-personalized cancer immunotherapies targeting shared neoantigens, non-mutated tumor-associated antigens, cancers of viral origin such as cancers driven by Epstein-Barr virus infection and Inhibigens.
Business Update Regarding COVID-19
The current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as theU.S. economy and financial markets. The full extent to which the COVID-19 pandemic will directly or indirectly affect our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets. To date, we have been able to continue our operations and do not anticipate any material interruptions for the foreseeable future. However, we are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations, including our expenses, supply chain and pre-clinical and clinical trials. Our office-based employees have been working from home sincemid-March 2020 and will continue to do so for the foreseeable future. Our third-party contract manufacturing partners continue to operate their manufacturing facilities at or near normal levels. While we currently do not anticipate any interruptions in our supply chain, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our and/or our third-party suppliers and contract manufacturing partners' ability to manufacture our products or the products of our partners.
Financing and business operations
We commenced business operations inAugust 2006 . We have financed our operations primarily through the issuance of our equity securities, debt financings, and amounts received through grants. As ofSeptember 30, 2020 , we had received an aggregate of$485.8 million in gross proceeds from the issuance of equity securities and gross proceeds from debt facilities and an aggregate of$7.9 million from grants. AtSeptember 30, 2020 , our cash and cash equivalents were$87.6 million . Since inception, we have incurred significant operating losses. We expect to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year. We will need to generate significant revenue to achieve profitability, and we may never do so. We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales for the foreseeable future. Our revenues for the three and nine months endedSeptember 30, 2020 were from the material transfer agreement ("MTA") with a strategic partner, Shionogi & Co. Ltd ("Shionogi"). See "Note 3 - Revenue" to the notes to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q. 23 -------------------------------------------------------------------------------- InJuly 2020 , we entered into a private placement financing transaction in which we issued shares of our common stock, pre-funded warrants to purchase shares of our common stock, and warrants to purchase shares of our common stock for aggregate gross cash proceeds of approximately$79.9 million , before deducting fees to the placement agent and other offering expenses payable by us (the "2020 Private Placement"). We incurred approximately$5.4 million of offering-related expenses, resulting in total net proceeds of approximately$74.5 million . In the nine months endedSeptember 30, 2020 , we sold approximately 1.0 million shares under our ATM program and received net proceeds of$2.7 million , after deducting commissions. For the nine months endedSeptember 30, 2019 , we sold no shares under the ATM program. As ofSeptember 30, 2020 , we had approximately$43.1 million in gross proceeds remaining under the ATM. InOctober 2019 , we entered into a purchase agreement withLincoln Park Capital ("LPC") pursuant to which LPC purchased$2.5 million of shares of our common stock at a purchase price of$2.587 per share. In addition, for a period of 30 months, we have the right, at our sole discretion, to sell up to an additional$27.5 million of our common stock based on prevailing market prices of our common stock at the time of each sale. In consideration for entering into the purchase agreement, we issued approximately 0.3 million shares of our common stock to LPC as a commitment fee. The purchase agreement limits our sales of shares of common stock to LPC to approximately 5.2 million shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the purchase agreement. The purchase agreement also prohibits us from directing LPC to purchase any shares of common stock if those shares, when aggregated with all other shares of our common stock then beneficially owned by LPC and its affiliates, would result in LPC and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of our common stock. In the nine months endedSeptember 30, 2020 , we sold 1.5 million shares of common stock to LPC, for net proceeds of approximately$3.5 million . As ofSeptember 30, 2020 , we had approximately$24.0 million remaining under our agreement with LPC. InJune 2019 , we completed an underwritten public offering in which we sold 10.5 million shares of our common stock at a price of$3.50 per share, for gross proceeds of approximately$36.8 million . We also granted the underwriters an option to purchase up to approximately an additional 1.6 million shares of common stock. The underwriters exercised this option in full. This generated additional gross proceeds of$5.5 million . We incurred approximately$3.9 million of offering-related expenses, resulting in total net proceeds of$38.4 million .
In
As reflected in our consolidated financial statements, we used cash to fund operating activities of$32.0 million for the nine months endedSeptember 30, 2020 and had$87.6 million available in cash and cash equivalents atSeptember 30, 2020 . In addition, we had an accumulated deficit of$359.7 million and we anticipate that we will continue to incur significant operating losses for the foreseeable future as we continue to develop our product candidates. Until such time, if ever, as we attempt to generate substantial product revenue and achieve profitability, we expect to finance our cash needs through a combination of equity offerings and strategic transactions, and other sources of funding. If we are unable to raise additional funds when needed, we may be required to implement cost reduction strategies, including ceasing development of GEN-009, GEN-011, and other corporate programs and activities. Our available cash and cash equivalents atSeptember 30, 2020 are expected to fund operations to mid-2022. Costs related to clinical trials can be unpredictable and there can be no guarantee that our current balances of cash and cash equivalents combined with proceeds received from other sources, will be sufficient to fund our trials or operations through this period. These funds will not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for, or commercially launch GEN-009, GEN-011 or any other product candidate. Accordingly, we will be required to obtain further funding through public or private equity offerings, collaboration and licensing arrangements, or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all, which could result in a decision to pause or delay development or advancement of clinical trials for one or more of our product candidates. Similarly, we may decide to pause or delay development or advancement of clinical trials for one or more of our product candidates if we believe that such development or advancement is imprudent or impractical. 24
--------------------------------------------------------------------------------
Financial Overview
Revenues
We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales for the foreseeable future. Our revenue was derived from the MTA with Shionogi. For additional information about our revenue recognition policy, see "Note 2-Summary of significant accounting policies" to the notes to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
Research and development expenses
Research and development expenses consist primarily of costs incurred to advance our preclinical and clinical candidates, which include:
•salary and related expenses; •expenses incurred under agreements with contract research organizations ("CROs"), contract manufacturing organizations ("CMOs"), consultants, and other vendors that conduct our clinical trials and preclinical activities; •costs of acquiring, developing, and manufacturing clinical trial materials and lab supplies; and •facility costs, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies. We expense internal research and development costs as incurred. Nonrefundable advanced payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received.
The following table identifies research and development expenses for our product candidates as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Discovery and pre-IND $ 3,722$ 2,289 $ 11,075$ 4,797 Phase 1/2a programs 2,135 3,768 10,544 13,076 Other research and development 1,691 769 4,504 2,262 Total research and development $ 7,548$ 6,826
$ 26,123
Discovery and pre-IND includes costs incurred to support our discovery research and translational science efforts up to the initiation of Phase 1 development. Phase 1/2a programs are Phase 1 or Phase 2 development activities. Other research and development include costs that are not specifically allocated to active programs, including facilities costs, depreciation expense, and other costs.
General and administrative expenses
General and administrative expenses consist primarily of salaries and related expenses for personnel in executive and other administrative functions. Other general and administrative expenses include facility costs, professional fees associated with consulting, corporate and intellectual property legal expenses, and accounting services. Other income/(expense) Other income/(expense) consists of the change in the fair value of the warrant liability, transaction expenses, interest expense, net of interest income, gains and losses on sale and disposal of assets, and gains and losses on foreign currency. 25
--------------------------------------------------------------------------------
Critical Accounting Policies and Significant Judgments and Estimates
We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates-which also would have been reasonable-could have been used. The preparation of financial statements in conformity withU.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management makes estimates and exercises judgement in revenue recognition, prepaid and accrued research and development expenses and the fair value of our warrant liability, which could change period to period based on changes in facts and circumstances. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions. These critical accounting policies are described in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 , and there have been no changes to such policies, except for our policy related to revenue recognition noted below. It is important that the discussion of our operating results that follow be read in conjunction with the critical accounting policies disclosed in our Annual Report on Form 10-K, as filed with theSEC onFebruary 13, 2020 .
Revenue Recognition
In applying ASC Topic 606 Revenue from Contracts with Customers, management must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. We utilize key assumptions to determine the standalone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation. We also utilize judgement in assessing whether or not variable consideration is constrained or if it can be allocated specifically to one or more performance obligations in the arrangement. When a performance obligation is satisfied, revenue is recognized for the amount of the transaction price that is allocated to that performance obligation on a relative standalone selling price basis, excluding estimates of variable consideration that are constrained. For performance obligations consisting of licenses and other promises, we utilize judgment to assess whether the combined performance obligation is satisfied over time or at a point in time and the recognition pattern for the portion of the transaction price allocated to the performance obligation. Results of Operations
Comparison of the three months ended
Three Months Ended September 30, Increase (in thousands) 2020 2019 (Decrease) License revenue $ 453 $ - $ 453 Operating expenses: Research and development 7,548 6,826 722 General and administrative 3,644 2,758 886 Total operating expenses 11,192 9,584 1,608 Loss from operations (10,739) (9,584) (1,155) Other income (expense): Change in fair value of warrants 10,767 2,206 8,561 Interest expense, net (377) (154) (223) Other expense (4,206) - (4,206) Total other income 6,184 2,052 4,132 Net loss $ (4,555)$ (7,532) $ 2,977 License revenue The$0.5 million increase in revenue in the three months endedSeptember 30, 2020 compared to the three months endedSeptember 30, 2019 relates to revenue recognized in connection with the MTA with Shionogi. 26 --------------------------------------------------------------------------------
Research and development expenses
Research and development expenses increased$0.7 million in the three months endedSeptember 30, 2020 , as compared to the three months endedSeptember 30, 2019 . The increase was largely due to an increase in headcount-related costs of approximately$0.8 million , partially offset by a decrease in external manufacturing costs of approximately$0.1 million .
General and administrative expenses
General and administrative expenses increased$0.9 million in the three months endedSeptember 30, 2020 , as compared to the three months endedSeptember 30, 2019 . The increase was primarily due to an increase in legal, consulting, and professional services of approximately$0.5 million and an increase in rent expense of approximately$0.4 million .
Change in fair value of warrants
Change in fair value of warrants reflects the non-cash change in the fair value of the 2020 Warrants and the 2018 Warrants, which are recorded at their fair value on the date of issuance and then remeasured at the end of each reporting period. In the three months endedSeptember 30, 2020 , the increase in the change in the fair value of warrants was primarily attributed to the decrease in our stock price between the initial valuation of our 2020 Warrants and the remeasurement atSeptember 30, 2020 .
Interest expense, net
Interest expense, net, consists primarily of interest expense on our long-term debt facilities, offset by interest earned on our cash equivalents.
Other expense
Other expense consists primarily of transaction costs incurred in connection with the 2020 Private Placement.
Comparison of the nine months ended
Nine Months Ended September 30, Increase (in thousands) 2020 2019 (Decrease) License revenue $ 1,359 $ -$ 1,359 Operating expenses: Research and development 26,123 20,135 5,988 General and administrative 10,511 8,992 1,519 Total operating expenses 36,634 29,127 7,507 Loss from operations (35,275) (29,127) (6,148)
Other income (expense):
Change in fair value of warrants 11,770 289 11,481 Interest expense, net (1,001) (755) (246) Other expense (4,223) (1) (4,222) Total other income (expense) 6,546 (467) 7,013 Net loss$ (28,729) $ (29,594) $ 865 License revenue
The
27
--------------------------------------------------------------------------------
Research and development expenses
Research and development expenses increased$6.0 million in the nine months endedSeptember 30, 2020 , as compared to the nine months endedSeptember 30, 2019 . The increase was largely due to an increase in external development costs of approximately$2.7 million , an increase in headcount-related costs of approximately$2.4 million , and an increase in clinical costs of approximately$0.8 million .
General and administrative expenses
General and administrative expenses increased$1.5 million in the nine months endedSeptember 30, 2020 , as compared to the nine months endedSeptember 30, 2019 . The increase was primarily due to an increase in rent expense of approximately$1.2 million , an increase in legal, consulting and professional services expenses of approximately$0.7 million , and an increase in insurance expense of approximately$0.3 million , partially offset by a decrease in headcount-related costs of approximately$0.8 million .
Change in fair value of warrants
Change in fair value of warrants reflects the non-cash change in the fair value of the 2020 Warrants and the 2018 Warrants, which are recorded at their fair value on the date of issuance and then remeasured at the end of each reporting period. In the nine months endedSeptember 30, 2020 , the increase in the change in the fair value of warrants was primarily attributed to the decrease in our stock price between the initial valuation of our 2020 Warrants and the remeasurement atSeptember 30, 2020 .
Interest expense, net
Interest expense, net, consists primarily of interest expense on our long-term debt facilities, offset by interest earned on our cash equivalents.
Other expense
Other expense consists primarily of transaction costs incurred in connection with the 2020 Private Placement.
Liquidity and Capital Resources
Overview
Since our inception in 2006, we have funded operations primarily through proceeds from issuances of common stock and long-term debt.
As of
InApril 2018 , we entered into an amended and restated loan and security agreement with Hercules Capital, Inc. ("Hercules"), which was subsequently amended inNovember 2019 (as amended, the "2018 Term Loan"). The 2018 Term Loan provides a$14.0 million term loan. The 2018 Term Loan will mature onMay 1, 2021 and accrues interest at a floating rate per annum equal to the greater of (i) 8.00% or (ii) the sum of 3.00% plus the prime rate. The 2018 Term Loan provides for interest-only payments untilJanuary 1, 2021 . Thereafter, payments will include equal installments of principal and interest through maturity. The 2018 Term Loan may be prepaid subject to a prepayment charge. We are also obligated to pay an end of term charge of$1.0 million at maturity. As ofSeptember 30, 2020 , we had outstanding borrowings of$13.7 million . We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales for the foreseeable future. Our revenues for the nine months endedSeptember 30, 2020 and 2019 were primarily from the MTA with Shionogi. InJuly 2020 , we completed the 2020 Private Placement and received net cash proceeds of approximately$74.5 million . In connection with the 2020 Private Placement, we issued approximately 21.4 million shares of our common stock, approximately 12.2 million pre-funded warrants to purchase additional shares of our common stock and warrants to purchase approximately 33.6 million shares of our common stock. 28
-------------------------------------------------------------------------------- In the nine months endedSeptember 30, 2020 , we sold approximately 1.0 million shares under our ATM program and received net proceeds of$2.7 million , after deducting commissions. For the nine months endedSeptember 30, 2019 , we sold no shares under the ATM program. As ofSeptember 30, 2020 , we had approximately$43.1 million in gross proceeds remaining under the ATM. InOctober 2019 , we entered into a purchase agreement with LPC pursuant to which LPC purchased$2.5 million of shares of our common stock at a purchase price of$2.587 per share. In addition, for a period of 30 months, we have the right, at our sole discretion, to sell up to an additional$27.5 million of our common stock based on prevailing market prices of our common stock at the time of each sale. In consideration for entering into the purchase agreement, we issued approximately 0.3 million shares of our common stock to LPC as a commitment fee. The purchase agreement limits our sales of shares of common stock to LPC to approximately 5.2 million shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the purchase agreement. The purchase agreement also prohibits us from directing LPC to purchase any shares of common stock if those shares, when aggregated with all other shares of our common stock then beneficially owned by LPC and its affiliates, would result in LPC and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of our common stock. In the nine months endedSeptember 30, 2020 , we sold approximately 1.5 million shares of common stock to LPC, for net proceeds of approximately$3.5 million . As ofSeptember 30, 2020 , we had approximately$24.0 million remaining under our agreement with LPC. InJune 2019 , we entered into an underwriting agreement relating to the underwritten public offering of 10.5 million shares of our common stock, par value$0.001 per share, at a price to the public of$3.50 per share, for gross proceeds of approximately$36.8 million (the "2019 Public Offering"). We also granted the underwriters an option to purchase up to an additional approximately 1.6 million shares of common stock. InJune 2019 , the underwriters exercised this option in full. We received approximately$5.5 million in gross proceeds from the underwriters' exercise of their option to purchase additional shares (the "Overallotment Option"). In connection with the 2019 Public Offering, inclusive of the Overallotment Option, we incurred approximately$3.9 million of offering-related expenses, resulting in total net proceeds of$38.4 million . InFebruary 2019 , we completed a private placement (the "2019 Private Placement") and received net cash proceeds of$13.8 million . In connection with the 2019 Private Placement, we issued approximately 3.2 million shares of common stock, pre-funded warrants to purchase approximately 0.5 million shares of common stock and warrants to purchase up to approximately 0.9 million shares of common stock. Cash Flows
The following table summarizes our sources and uses of cash for the nine months
ended
Nine Months Ended
2020
2019
Net cash used in operating activities$ (32,009) $ (28,748) Net cash used in investing activities (1,188)
(970)
Net cash provided by financing activities 80,695
50,321
Net increase in cash and cash equivalents $ 47,498$ 20,603 Operating Activities Net cash used in operating activities increased$3.3 million for the nine months endedSeptember 30, 2020 compared to the nine months endedSeptember 30, 2019 . The increase in cash used in operations is attributed to an increase in our research and development expenses due to the advancement of GEN-009 and GEN-011.
Investing activities
Net cash used by investing activities was for the purchases of property and
equipment in both periods ending
29
--------------------------------------------------------------------------------
Financing Activities
Net cash provided by financing activities increased$30.4 million for the nine months endedSeptember 30, 2020 compared to the nine months endedSeptember 30, 2019 . In the nine months endedSeptember 30, 2020 , the 2020 Private Placement generated net proceeds of$74.5 million , we sold shares of common stock to LPC for net proceeds of approximately$3.5 million and we sold shares under our ATM program and received net proceeds of approximately$2.7 million . In the nine months endedSeptember 30, 2019 , the 2019 Private Placement generated net proceeds of$13.8 million and the 2019 Public Offering generated net proceeds of$38.4 million , offset by the repayment of long-term debt of$1.4 million .
Operating Capital Requirements
Our primary uses of capital are for salaries and related expenses for personnel, manufacturing costs for preclinical and clinical materials, third-party clinical trial services, laboratory and related supplies, legal and other regulatory expenses, and general overhead costs. We expect these costs will continue to be the primary operating capital requirements for the near future. We expect that our existing cash and cash equivalents are sufficient to support our operations to mid-2022. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products coupled with the global economic uncertainty that has arisen with the outbreak of the coronavirus, or referred to as COVID-19, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to: •the timing and costs of our planned clinical trials for GEN-009 and GEN-011; •the progress, timing, and costs of manufacturing GEN-009 and GEN-011 for planned clinical trials; •the initiation, progress, timing, costs, and results of preclinical studies and clinical trials for our other product candidates and potential product candidates; •the terms and timing of any future collaborations, grants, licensing, consulting, or other arrangements that we may establish; •the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone payments, royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements; •the costs of preparing, filing, and prosecuting patent applications, maintaining and protecting our intellectual property rights, and defending against intellectual property related claims; •the extent to which we in-license or acquire other products and technologies; •the receipt of marketing approval; •the costs of commercialization activities for GEN-009, GEN-011 and other product candidates, if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution, and manufacturing capabilities; and •revenue received from commercial sales of our product candidates. We will need to obtain substantial additional funding in order to complete clinical trials and receive regulatory approval for GEN-009, GEN-011 and our other product candidates. To the extent that we raise additional capital through the sale of our common stock, convertible securities, or other equity securities, the ownership interests of our existing stockholders may be materially diluted and the terms of these securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders. If we are unable to raise capital when needed or on attractive terms, we could be forced to significantly delay, scale back, or discontinue the development of GEN-009, GEN-011 or our other product candidates, seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, our rights to GEN-009, GEN-011 or our other product candidates that we otherwise would seek to develop or commercialize ourselves.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
30
--------------------------------------------------------------------------------
© Edgar Online, source