NEXTCURE, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in this Quarterly Report and the audited financial information and related notes, as well as Management's Discussion and Analysis of Financial Condition and Results of Operations and other disclosures, included in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 , or our 2020 Annual Report. Some of the statements contained in this discussion and analysis or set forth elsewhere in this Quarterly Report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "aim," "anticipate," "assume," "believe," "continue," "could," "should," "due," "estimate," "expect," "intend," "hope," "may," "objective," "plan," "predict," "potential," "positioned," "seek," "target," "towards," "forward," "later," "will," "would" and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or similar language. Forward-looking statements include, but are not limited to, statements about:
our expectations regarding the timing, progress and results of preclinical
studies and clinical trials for NC318, NC410, NC762 and any other product
? candidates we develop, including statements regarding the timing of initiation
and completion of studies or trials and related preparatory work, the period
during which the results of the trials will become available and our research
and development programs; the impact of the COVID-19 pandemic (including the emergence of variant
strains) on the initiation, progress or expected timing of our clinical trials
? and the timing of related data, our efforts to adjust trial-related activities
to address the impact of the COVID-19 pandemic, and other future impacts of the
COVID-19 pandemic on the economy, our industry and our financial condition and
results of operations;
the timing or likelihood of regulatory filings for NC318, NC410, NC762 and any
? other product candidates we develop and our ability to obtain and maintain
regulatory approvals for such product candidates for any indication;
? the identification, analysis and use of biomarkers and biomarker data;
? development of patient selection assays and companion or complementary
diagnostic for NC318, NC410, NC762 or any other product candidates we develop;
? our manufacturing capabilities and strategy, including the scalability of our
manufacturing methods and processes;
? our expectations regarding the potential benefits, activity, effectiveness and
safety of NC318, NC410, NC762 and any other product candidates we develop;
? our intentions and ability to successfully commercialize our product
candidates;
? our expectations regarding the nature of the biological pathways we are
targeting;
? our expectations for our FIND-IO platform, including our ability to discover
and advance product candidates using our FIND-IO platform;
? the potential benefits of and our ability to maintain our relationships and
collaborations withYale University and Dr.Lieping Chen ; 14 Table of Contents
our estimates regarding our expenses, future revenues, capital requirements,
? our needs for or ability to obtain additional financing and the period over
which we expect our current cash, cash equivalents and marketable securities to
be sufficient to fund our operations;
? our intended reliance on and the performance of third parties, including
collaborators, contract research organizations and third-party manufacturers;
? our ability to protect and enforce our intellectual property protection and the
scope and duration of such protection;
? any failure of our information technology systems such as security breaches,
loss of data and other disruptions;
? developments and projections relating to our competitors and our industry,
including competing therapies; and
? the impact of current and future laws and regulations.
Forward-looking statements involve substantial risks and uncertainties that could cause actual results to differ materially from those projected in any forward-looking statement. Such risks and uncertainties include, among others: the impacts of the COVID-19 pandemic (including the emergence of variant strains) on our business, including our clinical trials, third parties on which we rely and our operations; positive results in preclinical studies may not be predictive of the results of clinical trials; our limited operating history and no products approved for commercial sale; our history of significant losses; our need to obtain additional financing; risks related to clinical development, marketing approval and commercialization; the unproven approach to the discovery and development of product candidates based on our FIND-IO platform; and dependence on key personnel. More detailed information on these and additional factors that could affect our actual results are described under the heading "Risk Factors" in our 2020 Annual Report and in our other filings with theSecurities and Exchange Commission . You should not place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date of this report, and we assume no obligation to update any forward-looking statements, even if expectations change.
Overview
We are a clinical-stage biopharmaceutical company committed to discovering and developing novel, first-in-class immunomedicines to treat cancer and other immune-related diseases by restoring normal immune function. We view the immune system holistically and, rather than target one specific immune cell type, we focus on understanding biological pathways, the interactions of cells and the role each interaction plays in an immune response. Through our proprietary Functional, Integrated, NextCure Discovery in Immuno-Oncology, or "FIND-IO", platform, we study various immune cells to discover and understand targets and structural components of immune cells and their functional impact in order to develop immunomedicines. We are focused on patientswho do not respond to current therapies, patients whose cancer progresses despite treatment and patients with cancer types not adequately addressed by available therapies. We are committed to discovering and developing first-in-class immunomedicines, which are immunomedicines that use new or unique mechanisms of action to treat a medical condition, for these patients. Our lead product candidate NC318 is a first-in-class immunomedicine against a novel immunomodulatory receptor called Siglec-15, or "S15". InOctober 2018 , we initiated a Phase 1/2 clinical trial of NC318 in patients with advanced or metastatic solid tumors. We completed enrollment of the Phase 1 portion of this trial inAugust 2019 , and preliminary data from the Phase 1 portion were presented at theSociety for Immunotherapy of Cancer annual meeting, or the SITC Meeting, inNovember 2019 and updated data were announced inDecember 2020 . We began enrolling patients in the Phase 2 portion of the Phase 1/2 clinical trial of NC318 trial inOctober 2019 . In this portion, we planned to enroll up to 100 patients with tumor types that have been shown to have elevated S15 expression, including non-small cell lung cancer, or "NSCLC", ovarian cancer, head and neck squamous cell carcinoma, or "HNSCC", and triple-negative breast cancer, or "TNBC". InJuly 2020 , we reported a confirmed partial response in a head and neck squamous cell carcinoma patient. In addition, we reported at the time that we would not progress the NSCLC and ovarian cancer cohorts to the second stage of the Simon 2-stage trial. InDecember 2020 , we completed a retrospective 15 Table of Contents analysis of S15 expression in biopsy samples collected from the Phase 2 patients at their initial screening. At that time, inclusion criterion was based on a TPS PD-L1 score <50%. Of the evaluable biopsies collected, 13% of the patients enrolled had S15-positive tumors. These biopsies showed that the selection criterion did not result in enough S15-positive patients for us to effectively evaluate the activity of NC318 in S15-positive tumors. We have modified the Phase 2 portion of the trial for S15 selection, and clinical sites can select for S15-positive patients through screening biopsies in aClinical Laboratory Improvement Amendments ("CLIA")-certified laboratory. In the second quarter of 2021, we resumed enrolling a NSCLC adenocarcinoma cohort in the Phase 2 trial, and we revised the dosing regimen to 800 mg weekly to increase overall drug exposure to NC318. We will provide a data update from our ongoing Phase 2 monotherapy trial of NC318 at the SITC Meeting inNovember 2021 .
In
Our second product candidate, NC410, is a novel immunomedicine designed to block immune suppression mediated by an immune modulator called Leukocyte-Associated Immunoglobulin-like Receptor 1. InJune 2020 , we initiated a Phase 1/2 clinical trial of NC410 in patients with advanced or metastatic solid tumors after a temporary delay due to the COVID-19 pandemic. The Phase 1 dose-escalation portion of this open-label trial is designed to evaluate the safety and tolerability of NC410 in patients with advanced or metastatic solid tumors and determine its pharmacologically active and/or maximum tolerated dose. After a recommended dose for the Phase 2 portion of the trial is determined, the efficacy of NC410 will be evaluated in select tumor types. InMay 2021 , at the 2021Virtual American Society of Clinical Oncology annual meeting, or the ASCO Meeting, we reported pre-clinical data demonstrating that NC410 promoted T-cell mediated anti-tumor immunity, enhanced infiltration and increased localized activity of T-cells in the tumor microenvironment. We will provide a data update from the Phase 1 portion of this trial at the SITC Meeting inNovember 2021 . Our third product candidate, NC762, is an immunomedicine targeting an immunomodulatory molecule called human B7 homolog 4 protein, or B7-H4. We submitted our investigational new drug application, or IND, to the FDA in the first quarter of 2021, which has been cleared. InJuly 2021 , we initiated a Phase 1/2 clinical trial of NC762 in patients with lung cancer, HER2+ breast cancer, ovarian cancer, or potentially other tumor types. The Phase 1 dose-escalation portion of this open-label trial is being designed to evaluate the safety and tolerability of NC762 and determine its pharmacologically active and/or maximum tolerated dose. After a recommended dose for the Phase 2 portion of the trial is determined, the efficacy of NC762 will be evaluated in select tumor types. We expect to announce initial data from the Phase 1 portion of
this trial in mid-2022. COVID-19
InMarch 2020 , theWorld Health Organization declared the novel coronavirus disease 2019 ("COVID-19"), outbreak a pandemic. In order to mitigate the spread of COVID-19, governments have imposed unprecedented restrictions on business operations, travel, and gatherings, resulting in a global economic downturn and other adverse economic and societal impacts. The COVID-19 pandemic has also overwhelmed or otherwise led to changes in the operations of many healthcare facilities, including clinical trial sites. However, our laboratories have continued operations throughout the pandemic mostly without interruption. The impact of the COVID-19 pandemic (including the impact of emerging variant strains of the COVID-19 virus) on our business and financial performance is uncertain and depends on various factors, including the scope and duration of the pandemic, the efficacy and global distribution of vaccines, government restrictions and other actions, including relief measures, implemented to address the impact of the pandemic, and resulting impacts on the financial markets and overall economy. The imposition of "lockdown," "social distancing" and "shelter in place" directives and other restrictions on business operations, travel and gatherings by state and federal governments inthe United States as well as governments in other regions of the world in response to the COVID-19 pandemic has placed significant strain on our clinical trial sites, has raised concerns around monitoring patient safety, and has caused enrollment to slow in our clinical trials. Any rise of COVID-19 infection rates, especially inthe United States , could continue to negatively affect enrollment going forward. We continue to closely monitor the COVID-19 situation and any potential impact
to
our planned activities.
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Financial Overview
Since commencing operations in 2015, we have devoted substantially all our efforts and financial resources to organizing and staffing our company, identifying business development opportunities, raising capital, securing intellectual property rights related to our product candidates, building and optimizing our manufacturing capabilities, and conducting discovery, research and development activities for our product candidates, discovery programs and FIND-IO platform. We have not generated any revenue from product sales and only limited revenue from other sources. As a result, with the exception of the three months endedMarch 31, 2020 , for which we reported a profit due to recognition of deferred revenue in connection with the termination of our former research and development collaboration agreement with Eli Lilly and Company, or "Lilly", we have never been profitable and have incurred net losses since the commencement of our operations. Our net loss for the three months endedSeptember 30, 2021 and 2020, was$17.9 million and$16.4 million , respectively, and our net loss for the nine months endedSeptember 30, 2021 and 2020, was$52.5 million and$21.1 million , respectively. As ofSeptember 30, 2021 , we had an accumulated deficit of$170.1 million , primarily as a result of research and development and general and administrative expenses. We do not expect to generate product revenue unless and until we obtain marketing approval and commercialize a product candidate, and we cannot assure you that we will ever generate significant revenue or profits.
We have funded our operations to date primarily with proceeds from public
offerings of our common stock, with private placements of our preferred stock
and with upfront fees received under our former research and development
collaboration agreement with Lilly, or the "Lilly Agreement," which was
terminated in
InNovember 2018 , we entered into the Lilly Agreement to use our FIND-IO platform to identify novel oncology targets for additional collaborative research and drug discovery by us and Lilly. We received an upfront payment of$25.0 million in cash and an equity investment of$15.0 million from Lilly upon entering into the Lilly Agreement, and we were eligible for quarterly research and development support payments during a portion of the term of the Lilly Agreement. EffectiveMarch 3, 2020 , Lilly terminated the Lilly Agreement without cause. OnMay 13, 2019 , we closed our initial public offering, or "IPO", in which we sold 5,750,000 shares of common stock at a public offering price of$15.00 per share, for aggregate gross proceeds of$86.3 million . The net offering proceeds to us were approximately$77.0 million after deducting underwriting discounts and commissions of$6.0 million and offering expenses of$3.4 million . OnNovember 19, 2019 , we completed an underwritten public offering, in which we issued and sold 4,077,192 shares of common stock at a public offering price of$36.75 per share. OnDecember 2, 2019 , the underwriters exercised in full their option to purchase an additional 611,578 shares of common stock at the public offering price of$36.75 , for total net proceeds to us of approximately$160.9 million , after deducting underwriting discounts and commissions of approximately$10.3 million and offering expenses of approximately$1.0 million . As ofSeptember 30, 2021 , we had cash, cash equivalents and marketable securities, excluding restricted cash, of$235.3 million . We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into the second half of 2023. We have based this estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner than we currently expect. We expect to incur substantial expenditures in the foreseeable future as we advance our product candidates through clinical development, the regulatory approval process and, if approved, commercialization, and as we expand our pipeline through research and development activities related to our FIND-IO platform and discovery programs. Specifically, in the near term, we expect to incur substantial expenses relating to our ongoing Phase 1/2 clinical trial and planned Phase 2 clinical trial of NC318, our ongoing Phase 1/2 clinical trial of NC410, and our ongoing Phase 1/2 clinical trial for NC762, and other research and development activities. We expect to continue to incur significantly increased costs as a result of operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. 17
Table of Contents
We will need substantial additional funding to support our continuing operations and to pursue our development strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through a combination of public and private equity offerings, debt financings, marketing and distribution arrangements, other collaborations, strategic alliances, and licensing arrangements. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials, or other research and development activities or one or more of our development programs.
Components of Our Results of Operations
Revenue
Through
For additional information about our revenue recognition policy, see Note 2 of the Notes to Financial Statements in our 2020 Annual Report.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our discovery efforts, research activities, development and testing of our product candidates as well as for clinical trials, including:
? salaries, benefits, and other related costs, including stock-based
compensation, for personnel engaged in research and development functions;
expenses incurred under agreements with third parties, including agreements
? with third parties that conduct research, preclinical activities or clinical
trials on our behalf, such as our corporate sponsored research agreement, or
"SRA," and our license agreement with
? costs of outside consultants, including their fees, stock-based compensation
and related travel expenses;
? the costs of laboratory supplies and acquiring, developing, and manufacturing
preclinical study and clinical trial materials; and
facility-related expenses, which include direct depreciation costs and
? allocated expenses for rent and maintenance of facilities and other operating
costs.
We expense research and development costs as incurred. Our expenses related to
clinical trials are based on actual costs incurred and estimates of other
incurred costs. These estimated costs are based on several factors, including
patient enrollment and related expenses at clinical investigator sites, contract
services received, consulting agreement costs and efforts expended under
contracts with research institutions and third-party contract research
organizations that conduct and manage clinical trials on our behalf. We
generally accrue estimated costs related to clinical trials based on contracted
amounts applied to the level of patient enrollment and other activity according
to the protocol. If future timelines or contracts are modified based on changes
in the clinical trial protocol or scope of work to be performed, we would modify
our estimates of accrued expenses accordingly on a prospective basis.
Historically, any such modifications have not been material.
Research and development activities are central to our business model. We expect
that our research and development expenses will continue to increase
substantially for the foreseeable future as we advance our product candidates
through development and expand the number of trials we are conducting and the
patients enrolled in those trials, as we utilize our current good manufacturing
practice, or "cGMP", manufacturing capacity, including to provide
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drug supply of NC318, NC410 and NC762 for future clinical trials, and as we expand our pipeline through research and development activities related to our FIND-IO platform and discovery programs.
We cannot determine with certainty the duration and costs of future clinical trials of NC318, NC410, NC762 or any other product candidate we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we may obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of NC318, NC410, NC762 and any other product candidate we may develop will depend on a variety of factors, including:
the scope, progress, results, and costs of clinical trials of NC318 and NC410
? and NC762, as well as of any future clinical trials of other product candidates
and other research and development activities that we may conduct;
? the impact of the COVID-19 pandemic, including delays and slowdowns as a result
of strain on our clinical trial sites and concerns about patient safety;
? uncertainties in selection of indications, clinical trial design and patient
enrollment rates;
the probability of success for our product candidates, including safety and
? efficacy, early clinical data, competition, ease, and ability of manufacturing
and commercial viability;
? significant and changing government regulation and regulatory guidance;
? the timing and receipt of any development or marketing approvals; and
? the expense of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights.
A change in the outcome of any of these variables with respect to the development of a product candidate could lead to a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time to complete clinical development for any such product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel related costs, including payroll and stock-based compensation, for personnel in executive, finance, human resources, business and corporate development and other administrative functions, professional fees for legal, intellectual property, consulting, and accounting services, rent and other facility-related costs, depreciation and other general operating expenses not otherwise classified as research and development expenses. General and administrative expenses also include all patent-related costs incurred in connection with filing and prosecuting patent applications, which are expensed as incurred.
We anticipate that our general and administrative expenses will increase substantially during the next few years as a result of staff expansion and additional occupancy costs, higher legal and accounting fees, investor relations costs, higher insurance premiums and other compliance costs.
Other Income, Net
Other income, net consists primarily of interest income earned on marketable securities and interest expense on our term loan with a commercial bank, or the "Term Loan", which was paid in full and closed inAugust 2021 . 19 Table of Contents Results of Operations
Comparison of the Three and Nine Months Ended
The following table summarizes our results of operations for the periods
indicated (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 Change 2021 2020 Change
Revenue:
Revenue from former research
and development arrangement $ - $ - $ - $ -$ 22,378 $ (22,378) Operating expenses: Research and development 13,597 12,740 857 37,928 34,448 3,480
General and administrative 4,911 4,659 252 15,766 12,918 2,848 Loss from operations (18,508) (17,399) (1,109) (53,694) (24,988) (28,706) Other income, net 578 1,032 (454)
1,244 3,846 (2,602)
Net loss $ (17,930) $ (16,367) $ (1,563) $ (52,450) $ (21,142) $ (31,308) Revenue from Research and Development Arrangement
No revenue was recognized for the three months endedSeptember 30, 2021 and 2020. Revenue was$0 and$22.4 million for the nine months endedSeptember 30, 2021 and 2020, respectively. The decrease in revenue for the nine months endedSeptember 30, 2021 , compared to the same period in 2020 is related to the recognition of all deferred revenue under the Lilly Agreement as of the Lilly Termination Date. Effective with the termination of the agreement, no further quarterly research and development support payments are payable to the Company.
Research and Development Expenses
The following table summarizes our research and development expenses by product candidate for the periods indicated (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 Change 2021 2020 Change
External research and development expenses:
NC318 $ 1,490 $ 1,955 $ (465) $ 3,791 $ 7,483 $ (3,692)
NC410 1,160 630 530 2,999 1,506 1,493
NC762 1,043 545 498 2,881 1,813 1,068Programs in discovery and preclinical development 4,289 4,006 283 11,421 8,913 2,508 Total external research and development expenses 7,982 7,136 846 21,092 19,715 1,377 Total internal research and development expenses 5,615 5,604 11 16,836 14,733 2,103 Total research and development expenses$ 13,597 $ 12,740
$ 857 $ 37,928 $ 34,448 $ 3,480 We do not allocate personnel-related costs, including stock-based compensation costs, or other indirect costs to specific programs, as they are deployed across multiple projects under development and discovery and, as such are separately classified as internal research and development expenses in the table above. Research and development expenses for the three months endedSeptember 30, 2021 increased by$0.9 million to$13.6 million compared to$12.7 million for the three months endedSeptember 30, 2020 . The increase was driven by$0.8 million in clinical-related costs, partially offset by timing of research and manufacturing supply costs. 20 Table of Contents Research and development expenses for the nine months endedSeptember 30, 2021 increased by$3.4 million to$37.9 million compared to$34.5 million for the nine months endedSeptember 30, 2020 . The increase was driven by$1.3 million in personnel-related costs and costs related to advancing our development programs.
General and Administrative Expenses
General and administrative expenses for the three months endedSeptember 30, 2021 increased by$0.2 million to$4.9 million as compared to$4.7 million for the three months endedSeptember 30, 2020 . The increase was primarily due to personnel-related costs. General and administrative expenses for the nine months endedSeptember 30, 2021 increased by$2.9 million to$15.8 million as compared to$12.9 million for the nine months endedSeptember 30, 2020 . The increase was driven by$2.3 million in personnel-related costs, primarily in stock compensation expense.
Other Income, Net
Other income, net for the three months endedSeptember 30, 2021 decreased by$0.4 million to$0.6 million from$1.0 million for the three months endedSeptember 30, 2020 due to lower investment balances and a reduction in interest rates. Other income, net for the nine months endedSeptember 30, 2021 , decreased by$2.6 million to$1.2 million from$3.8 million for the nine months endedSeptember 30, 2020 due to lower investment balances and a reduction in interest rates.
Liquidity and Capital Resources
We have financed our operations primarily with proceeds from public offerings of our common stock, private placements of our preferred stock and upfront fees received under the Lilly Agreement. OnMay 13, 2019 , we closed our IPO, in which we sold 5,750,000 shares of common stock at a public offering price of$15.00 per share, for net offering proceeds to us of approximately$77.0 million after deducting underwriting discounts and commissions and offering expenses. OnNovember 19, 2019 , we completed an underwritten public offering in which we sold 4,077,192 shares of common stock at a public offering price of$36.75 per share. OnDecember 2, 2019 , the underwriters exercised in full their option to purchase an additional 611,578 shares of common stock at a public offering price of$36.75 . Net offering proceeds to us were approximately$160.9 million after deducting underwriting discounts and commissions and offering expenses. Since inception, we have received aggregate gross proceeds of$164.4 million from the sale and issuance of shares of our preferred stock. In addition, inNovember 2018 , we received an upfront payment of$25.0 million in cash from Lilly pursuant to the Lilly Agreement. Our cash and cash equivalents are held in money market funds. OnMay 6, 2021 , the Company entered into a sales agreement (the "Sales Agreement") withSVB Leerink LLC (the "Agent"), pursuant to which the Company may sell, from time to time, up to an aggregate sales price of$75 million of its common stock through the Agent in negotiated transactions that are deemed to be an "at the market offering." The Agent will be entitled to compensation equal to 3.0% of the gross proceeds from the sale of all shares of common stock sold through it as Agent under the Sales Agreement. Actual sales will depend on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, the trading price of the common stock, capital needs and determinations by the Company of the appropriate sources of funding for the Company. We have not yet sold any shares of our common stock pursuant to the Sales Agreement. As ofSeptember 30, 2021 , we had cash, cash equivalents, and marketable securities, excluding restricted cash, of$235.3 million . We believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our planned operations into the second half of 2023. InApril 2016 , we entered into the Term Loan to finance laboratory equipment purchases. InJanuary 2019 , we amended the Term Loan to increase our borrowing capacity from$1.0 million to$5.0 million . InAugust 2021 , we fully paid the remaining principal on the Term Loan, and there are no outstanding payments
due
from us.
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We will continue to require additional capital to develop our product candidates
and fund operations for the foreseeable future. We may seek to raise capital
through sale of equity, debt financings, strategic alliances, and licensing
arrangements. Adequate additional funding may not be available to us on
acceptable terms or at all, including as a result of the impact of the COVID-19
pandemic. If we fail to raise capital or enter into such arrangements as and
when needed, we may have to significantly delay, scale back or discontinue the
development of our product candidates or delay our efforts to expand our
pipeline of product candidates.
Cash Flows
The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):
Nine Months Ended
September 30,
2021 2020
Net cash provided by (used in):
Operating activities $ (43,795) $ (38,676)
Investing activities 47,602 27,025
Financing activities (3,388) (1,017)
Net increase (decrease) in cash and cash equivalents
Cash Used in Operating Activities
Net cash used in operating activities was$43.8 million for the nine months endedSeptember 30, 2021 , which was primarily due to our net loss of$52.5 million . Net cash used in operating activities was$38.7 million for the nine months endedSeptember 30, 2020 , which was primarily due to our net loss of$21.1 million , inclusive of our recognition of deferred revenue related to the terminated Lilly Agreement of$22.4 million .
Cash Provided by Investing Activities
Cash provided by investing activities for the nine months endedSeptember 30, 2021 was$47.6 million , which was primarily due to net proceeds from marketable securities of$49.1 million , partially offset by purchases of property and equipment of$1.5 million . Cash provided by investing activities for the nine months endedSeptember 30, 2020 was$27.0 million , which was primarily due to net proceeds from marketable securities of$33.2 million , partially offset by purchases of property and equipment of$6.2 million .
Cash Used in Financing Activities
Cash used in financing activities was$3.4 million for the nine months endedSeptember 30, 2021 , which consisted primarily of payments related to the closure of the Term Loan. Cash used in financing activities was$1.0 million for the nine months endedSeptember 30, 2020 , which consisted primarily of payments related to the Term Loan.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations during the nine months endedSeptember 30, 2021 , as compared to those disclosed in our 2020 Annual Report.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our condensed financial statements have been prepared in accordance withU.S. generally accepted accounting principles, or "GAAP". The preparation of our 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 financial statements, as well as the reported expenses incurred during the reporting periods. The most significant assumptions used in the financial statements are the underlying assumptions used in revenue recognition and valuing share-based compensation, including the fair value of our common stock in periods before our IPO. Our estimates are based on 22 Table of Contents
our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.
During the nine months ended
Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements,
as defined in the rules and regulations of the
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed financial statements included elsewhere in this Quarterly Report for a discussion of recent accounting pronouncements that may impact our financial position and results of operations.
Emerging Growth Company Status
As an emerging growth company, or "EGC", under the Jumpstart Our Business Startups Act of 2012, or the "JOBS Act", we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. We have elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies.
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