TRILLIUM THERAPEUTICS The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year endedDecember 31, 2020 filed with theSEC . Overview We are a clinical stage immuno-oncology company developing innovative therapies for the treatment of cancer. Immunotherapy is a rapidly evolving field that is redefining cancer care by harnessing a patient's own immune system to eliminate tumor cells. Our focus is on developing inhibitors of CD47, a checkpoint of the innate immune system. CD47 is emerging as a promising next generation immuno-oncology target following the scientific, clinical and commercial success of T-cell checkpoint inhibitors. We have two product candidates in early stages of clinical development - TTI-622 (a SIRP?-IgG4 Fc fusion protein) and TTI-621 (a SIRP?-IgG1 Fc fusion protein). Both molecules are highly differentiated from the rest of the CD47 field by meaningful monotherapy activity demonstrated across a range of hematologic malignancies, and minimal binding to red blood cells, hence reducing the risk of anemia, a common side effect of some other CD47 agents. In 2021, our immediate goal has been to complete ongoing dose escalation studies, and initiate a Phase 1b/2 program across a range of both hematologic and solid tumor malignancies. OnAugust 20, 2021 , Trillium, Pfizer Inc., aDelaware corporation ("Pfizer") and PF Argentum Acquisition ULC, a corporation formed under the laws of the Province ofBritish Columbia ("Purchaser"), entered into a definitive arrangement agreement (the "Arrangement Agreement"), under which Purchaser will acquire all of the issued and outstanding common shares and first preferred shares (collectively, the "Shares") of Trillium not owned by Purchaser and its affiliates for$18.50 per Share in cash. The acquisition of the Shares will be completed by way of a statutory plan of arrangement under the Business Corporations Act (British Columbia ) (the "Arrangement"). Completion of the Arrangement is subject to a number of conditions, including: (i) the approval of 66?% of the votes cast by Trillium's shareholders (the "Shareholders"), voting together as a single class, at a special meeting of Trillium (the "Meeting") and approval of 66?% of the votes cast by the Shareholders and the holders of outstanding warrants, voting together as a single class, at the Meeting (the "Required Securityholder Approval"), (ii) court approval of the Arrangement; (iii) the accuracy of the representations and warranties contained in the Arrangement Agreement, subject to specified thresholds and exceptions; (iv) compliance in all material respects with the covenants contained in the Arrangement Agreement; (v) the absence of a Material Adverse Effect (as defined in the Arrangement Agreement) with respect to Trillium; and (vi) receipt of approval or expiration of the applicable waiting period, under each of the Competition Act (Canada ) and theU.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. OnOctober 26, 2021 , Trillium held the Meeting at which the Required Securityholder Approval was obtained. OnOctober 28, 2021 , Trillium obtained a final order from theSupreme Court of British Columbia approving the Arrangement under Division 5 of Part 9 of the Business Corporations Act (British Columbia ).
Our Product Candidates (SIRP?Fc)
Our Pipeline
We have two SIRP?Fc fusion proteins, TTI-622 and TTI-621, in clinical
development. TTI-622 consists of the CD47-binding domain of human SIRP? linked
to the Fc region of IgG4. It is designed to enhance macrophage-mediated
phagocytosis and anti-tumor activity by blocking the CD47 "don't eat me" signal
and generating a moderate activating "eat" signal via the IgG4 Fc. TTI-621
consists of the same CD47-binding domain as TTI-622 but linked to the Fc region
of IgG1, which generates a stronger "eat" signal than IgG4. It is anticipated
that the distinct "eat" signals will result in different tolerability profiles,
thus achieving different levels of drug exposure and CD47 blockade in patients.
Specifically, TTI-622 is expected to achieve a high level of CD47 blockade and
deliver a moderate "eat" signal, whereas TTI-621 is
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expected to achieve a lower level of CD47 blockade but deliver a strong "eat" signal. Both agents have been well tolerated and have demonstrated monotherapy activity in patients with B- and T-cell lymphomas [[Image Removed: Graphic]] Phase 1b/2 Clinical Programs OnApril 28, 2021 , we announced the planned initiation of Phase 1b/2 programs with both TTI-622 and TTI-621. We expect that these programs will initially cover seven indications (four hematological cancers, three solid tumors), and study TTI-622 and TTI-621 primarily in combination with other anti-cancer agents.
Specifically, if the Arrangement does not close, we expect to evaluate TTI-622 in the following settings and combination regimens:
? Relapsed or refractory multiple myeloma, in a combination with carfilzomib +
dexamethasone;
? First line p53 mutant acute myeloid leukemia, or AML, in a combination with
azacitidine;
? First line elderly or unfit p53 wild type AML patients, in a combination with
azacitidine and venetoclax;
? Relapsed or refractory diffuse large B-cell lymphoma, or DLBCL, in a
combination with anti-PD-1, in an investigator-sponsored trial at
? Platinum-resistant ovarian cancer, in a combination with chemotherapy; and
? A second solid tumor combination study to be announced later in 2021.
We plan to initiate these studies with 8 mg/kg weekly dosing, or potentially less frequent dosing regimens at higher doses.
If the Arrangement does not close, we expect to evaluate TTI-621 in the following settings and combination regimens:
? Second line peripheral T-cell lymphoma, or PTCL, as a monotherapy;
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? Relapsed or refractory DLBCL, in a combination with anti-PD-1, in an
investigator-sponsored trial at
? First line leiomyosarcoma, a subtype of soft tissue sarcoma, in a combination
with doxorubicin.
Initial Phase 1b/2 studies are planned to be initiated at two dose levels (0.2 mg/kg and up to 2.0 mg/kg weekly). Different levels may be chosen based on overlapping toxicities with combination agents.
In addition, bi-weekly, or Q2W, and every three weeks, or Q3W, dosing schedules will be evaluated for each molecule in the ongoing monotherapy dose escalation studies.
A two-part, multicenter, open-label, Phase 1a/1b study of TTI-622 in patients with advanced relapsed or refractory lymphoma and multiple myeloma is currently in progress (NCT03530683). In the ongoing Phase 1a dose escalation part, relapsed or refractory lymphoma patients are being enrolled in sequential dose cohorts to receive TTI-622 once weekly to characterize safety, tolerability, pharmacokinetics, and to determine the maximum tolerated dose, or MTD. In the Phase 1b part, patients with advanced relapsed or refractory lymphoma and multiple myeloma will be treated with TTI-622 in combination with other agents. As of the data cutoff date ofApril 12, 2021 , a total of 42 patients have been enrolled in the ongoing study. Patients received weekly intravenous doses between 0.05 and 18 mg/kg. All dose levels were very well tolerated and an MTD was not reached. The study is continuing, with 3 more patients at 18 mg/kg pending response assessments as of theApril 12, 2021 cutoff date.
A Phase 1 multicenter, open-label study in which patients with advanced relapsed or refractory hematologic malignancies receive intravenous TTI-621 is currently in progress (NCT02663518). The ongoing dose escalation Part 4 of the study is enrolling patients with cutaneous T-cell lymphoma, or CTCL. As of the data cutoff date ofApril 12, 2021 , TTI-621 was well tolerated and an MTD in Part 4 was not reached. The study is continuing, with 3 more patients at 2.0 mg/kg pending response assessments as of theApril 12, 2021 cutoff date.
Impact of the Ongoing COVID-19 Pandemic
We continue to carefully monitor the COVID-19 pandemic and its potential impact
on our business and have taken important steps to ensure the safety of employees
and their families and to reduce the spread of COVID-19. The pandemic may result
in a slowdown of the enrollment of patients in our clinical trials, including
our planned Phase 1b/2 programs. We have worked closely with our contract
research organizations, or CROs, to ensure that our clinical sites are well
prepared to address any issues that may arise as a result of the pandemic,
including but not limited to, ensuring sufficient drug inventory at clinical
sites and ensuring proper steps are undertaken to allow for full remote
monitoring of our clinical trials. There have been no significant disruptions to
our drug supply chain although some raw materials used in drug production have
taken longer to source and we have experienced delays in scheduled manufacturing
campaigns due to COVID-19 vaccine production using manufacturing capacity at our
contract manufacturing organization, or CMO. We have sufficient drug inventory
on hand to complete existing studies and have secured drug manufacturing slots
through 2021 that we expect will provide continuity of drug supply, although
risks of delays are elevated due to ongoing impacts related to COVID-19.
The impact of the COVID-19 pandemic will depend on future developments, which
are highly uncertain and cannot be predicted with confidence, including the
scope, severity and duration of the pandemic, the impact of new strains of the
virus, the effectiveness and availability of vaccines, the ability to
successfully administer vaccines to populations in the territories in which we
operate, the actions taken to contain the pandemic or mitigate its impact, and
the direct and indirect economic effects of the pandemic and containment
measures, among others.
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Financial Operations Overview
Since our inception, we have devoted substantial resources to developing our
SIRP?Fc programs, including activities to manufacture product candidates,
undertake preclinical studies and conduct clinical trials, and provide general
and administrative support for these operations. We have not generated any
revenue from product sales.
We have incurred net losses since inception. Our net loss was $48.6 million for
the nine months ended September 30, 2021 . As of September 30, 2021 , we had an
accumulated deficit of $298.0 million . Substantially all of our net losses have
resulted from costs incurred in connection with our research and development
programs and from general and administrative costs associated with our
operations. We expect to continue to incur significant expenses and increasing
operating losses over at least the next several years. We expect our expenses
will increase substantially in connection with our ongoing activities, as we:
? advance product candidates TTI-622 and TTI-621 into multiple Phase 1b/2 trials;
? manufacture our product candidates in sufficient quantities to supply these
expanded trials;
? seek applicable regulatory approvals for our product candidates; and
? add personnel to support our product development efforts.
We expect to expand our staffing in 2021, primarily in chemistry, manufacturing and controls, or CMC, and clinical operations as we intend to initiate multiple Phase 1b/2 combination studies. We will also undertake research, manufacturing and regulatory activities to support the TTI-622 and TTI-621 clinical programs. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of TTI-622, TTI-621 and any future product candidates. In addition, if we obtain marketing approval for any product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates. As a result, we will need substantial additional funding to support our continued operations. To date, we have principally raised capital through registered direct offerings and underwritten public offerings of our common and preferred stock and the exercise of warrants and stock options. As ofSeptember 30, 2021 , we had approximately$250.7 million in cash and cash equivalents and marketable securities. 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 revenues from the sale of any approved products, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of our TTI-622 and TTI-621 product candidates, which include:
expenses incurred under agreements with third-party contract organizations and
? investigative clinical trial sites that conduct research and development
activities on our behalf;
? costs related to production of clinical materials, including fees paid to
contract manufacturers;
? laboratory and vendor expenses related to the execution of clinical trials;
? employee-related expenses, which include salaries, benefits and stock-based
compensation;
? costs associated with our regulatory and quality control operations; and
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facilities, depreciation, and other expenses, which include lease expenses and
? expenses for the maintenance of facilities, information technology, insurance,
and other supplies in support of research and development activities.
We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, clinical sites, and third-party service providers. The costs of intangible assets that are purchased from others for a particular research and development project and that have no alternative future uses are considered research and development costs and are expensed when incurred. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and as services are performed. The largest component of our operating expenses has historically been our investment in research and development activities related to the clinical development of TTI-622 and TTI-621. We recognize the funds from research and development grants as a reduction of research and development expenses when the related eligible research costs are incurred. OnApril 28, 2021 , we announced the planned initiation of Phase 1b/2 programs for both TTI-622 and TTI-621. These programs will initially cover seven indications (four hematological cancers, three solid tumors), and study TTI-622 and TTI-621 primarily in combination with other anti-cancer agents. In connection with this announcement, we expect our research and development expenses to increase substantially for the foreseeable future. Additionally, we expect our manufacturing costs to increase in order to supply these product candidates in sufficient quantities to conduct our planned clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs and professional fees, including legal, human resources, audit and accounting services, insurance, directors' fees, shareholder relations, corporate development, and expenses associated with obtaining and maintaining patents. Personnel-related costs consist of salaries, benefits and stock-based compensation. We anticipate general and administrative expenses will increase as our research and development advances or expands. These increases will likely relate to additional personnel and increased costs related to finance, legal and intellectual property-related matters along with increased expenses related to operating as a publicly traded company and aU.S. domestic issuer, such as fees related to audit, legal, and tax services; and corporate development, regulatory compliance programs, insurance, investor relations, and other related expenses.
Interest income, net
Interest income consists of interest generated on our cash and cash equivalents
and marketable securities.
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Results of Operations
Comparison of the three months ended
The following table summarizes our results of operations for the three months
ended
Three months ended September 30,
2021 2020 Change
(in thousands)
Revenue $ - $ - $ -
Operating expenses
Research and development $ 9,925 $ 7,476 $ 2,449
General and administrative 9,526 5,518 4,008
Total operating expenses 19,451 12,994 6,457
Operating loss (19,451) (12,994) (6,457)
Interest income, net 183 483 (300)
Net foreign currency gain 11 13 (2)
Total other income, net 194 496 (302)
Net loss before income taxes (19,257) (12,498) (6,759)
Income tax expense 59 9 50
Net loss (19,316) (12,507) (6,809)
Research and Development Expenses
Research and development expenses increased by$2.4 million from$7.5 million for the three months endedSeptember 30, 2020 to$9.9 million for the three months endedSeptember 30, 2021 . The following table summarizes our research and development expenses, for the three months endedSeptember 30, 2021 and 2020: Three months ended September 30, 2021 2020 Change (in thousands) Program-specific costs
SIRP?Fc (TTI-622 and TTI-621) $ 5,551 2,823$ 2,728 Non program-specific costs Employee and contractor related expenses 2,442 1,560 882 Stock-based compensation expenses 1,522 2,729 (1,207) Facility, amortization, technology, and other expenses 410 364 46 Total research and development expenses 9,925
7,476 2,449
In the third quarter of 2021, all of our resources were focused on the
development of TTI-622 and TTI-621, including clinical development, research,
manufacturing and regulatory activities, and for working capital and general
corporate purposes. The increase in research and development expenses for the
three months ended September 30, 2021 was primarily attributable to the
following:
manufacturing activity to support our expanded clinical operations, increased
? clinical trial costs due to higher patient enrollment in the TTI-622 and
TTI-621 trials, an increase in costs related to the initiation of animal
studies, and an increase in lab reagent costs to support increased
translational research activity;
? costs, due to a higher employee headcount in support of our expanded
manufacturing and clinical trial activity; and
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These increased costs were partially offset by
? stock-based compensation expense, mainly due to a decrease in the fair value of
stock option liabilities.
General and Administrative Expenses
General and administrative expenses increased by
? Agreement, and
relating to preparations and required filings for the special meeting of shareholders held inOctober 2021 ;
? higher weighted average fair values of stock options issued and outstanding,
offset by a decrease in the fair value of stock option liabilities; and
?
director and officer insurance premiums.
Other Income, Net
Net interest income, consisting of interest earned on cash and cash equivalents and marketable securities less fees and expenses related to amortization of bond premiums and/or discounts decreased due mainly to lower interest rates on cash balances and lower available returns on marketable securities than the prior period.
Comparison of the nine months ended
The following table summarizes our results of operations for the nine months
ended
Nine months ended September 30,
2021 2020 Change
(in thousands)
Revenue $ 10 $ 115 $ (105)
Operating expenses
Research and development $ 29,848 $ 19,638 $ 10,210
General and administrative 19,593 33,890 (14,297)
Total operating expenses 49,441 53,528 (4,087)
Operating loss (49,431) (53,413) 3,982
Interest income, net 1,064 1,336 (272)Net foreign currency gain (loss) (11) 114
(125)
Total other income, net 1,053 1,450 (397)
Net loss before income taxes (48,378) (51,963) 3,585
Income tax expense 199 60 139
Net loss (48,577) (52,023) 3,446
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Research and Development Expenses
Research and development expenses increased by$10.2 million from$19.6 million for the nine months endedSeptember 30, 2020 to$29.8 million for the nine months endedSeptember 30, 2021 . The following table summarizes our research and development expenses for the nine months endedSeptember 30, 2021 and 2020:
Nine months ended September 30,
2021 2020 Change
(in thousands)
Program-specific costs
SIRP?Fc (TTI-622 and TTI-621) $ 20,033 9,001 $ 11,032
Non program-specific costsEmployee and contractor related expenses 6,611 4,317 2,294 Stock-based compensation expenses 1,943 5,164 (3,221) Facility, amortization, technology, and other expenses 1,261 1,156 105 Total research and development expenses 29,848
19,638 10,210
In the first nine months of 2021, all of our resources were focused on the development of TTI-622 and TTI-621, including clinical development, research, manufacturing and regulatory activities. The increase in research and development expenses for the nine months endedSeptember 30, 2021 was primarily attributable to the following:
in manufacturing activity to support our expanded clinical operations, a net
? increase in clinical trial costs due higher patient enrollment in the TTI-622
and TTI-621 trials; increased lab reagent costs to support higher translational
research activity for clinical trials; and an increase in costs related to the
initiation of animal studies;
? costs, due to a higher employee headcount in support of our expanded
manufacturing and clinical trial activity;
?
and in support of our increased manufacturing and clinical trial activity; and
These increased costs were partially offset by a net decrease of
? in stock-based compensation expense, mainly due to a decrease in the fair value
of stock option liabilities which was partially offset by the higher weighted
average fair values of stock options.
General and Administrative Expenses
General and administrative expenses decreased by$14.3 million from$33.9 million for the nine months endedSeptember 30, 2020 to$19.6 million for the nine months endedSeptember 30, 2021 . The decrease in general and administrative expenses was primarily attributable to the following:
million in the prior period related to the cash-settled deferred share unit, or
? DSU, liability prior to reclassification to equity on
partially offset by increased professional fees related to the Arrangement
Agreement, and recruiting expenses; and
The net decrease in expenses was partially offset by
stock-based compensation expense, mainly relating to higher weighted average
fair values of stock options issued and partially offset by a decrease in the
? fair value of stock option liabilities;
officer insurance premiums,
benefits expenses, and
exchange filing fees relating to the preparations and required filings for the
special meeting of shareholders held inOctober 2021 . 23 Table of Contents Other Income,Net Net interest income, consisting of interest earned on cash and cash equivalents and marketable securities less fees and expenses related to amortization of bond premiums and/or discounts, decreased due mainly to lower interest rates on cash balances and lower available returns on marketable securities than the prior period.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily from sales of equity and proceeds from the exercise of warrants and stock options. Our primary capital needs are for funds to support our scientific research and development activities, including staffing, facilities, manufacturing, preclinical studies, clinical trials, administrative costs and for working capital. We expect that our existing combined cash and cash equivalents and marketable securities will enable us to fund our expected operating requirements for at least the next 12 months. The process of drug development can be costly and the timing and outcomes of clinical trials is uncertain. The assumptions upon which we have based our estimates are routinely evaluated and may be subject to change. The actual amount of our expenditures will vary depending upon a number of factors including but not limited to the design, timing and duration of future clinical trials, the progress of our research and development programs, the infrastructure to support a clinical stage organization, and the level of financial resources available. We have funded our operations principally through registered direct offerings and underwritten public offerings of our common and preferred stock, and the exercise of warrants and stock options. During the nine months endedSeptember 30, 2021 , we received gross proceeds of$2.6 million on the exercise of warrants and stock options. OnMarch 18, 2021 , we filed an automatic shelf registration statement on Form S-3ASR (File No. 333-254443) with theSEC that provides that we may sell from time to time our common shares, first preferred shares, subscription receipts, warrants and units separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of sale and set forth in one or more prospectus supplements. We have not sold any securities pursuant to such registration statement but may do so in the future.
Cash flows
The following table provides information regarding our cash flows for the nine
months ended
Nine months ended September 30,
2021 2020
(in thousands)
Cash used in operating activities $ (42,547) $ (17,818)
Cash used in investing activities (114,354) (47,005)
Cash provided by financing activities 2,638 287,403
Impact of foreign exchange rate on cash and cash equivalents (110) 96
Net increase (decrease) in cash and cash equivalents (154,373) 222,676
Cash flows from operating activities
Our cash flows from operating activities are significantly influenced by our use of cash for operating expenses and working capital to support our business. We have historically experienced negative cash flows from operating activities as we develop our SIRP?Fc programs. Net cash used in operating activities was$42.5 million during the nine months endedSeptember 30, 2021 compared to$17.8 million during the nine months endedSeptember 30, 2020 . The$24.7 million increase in cash used in operating activities for the nine months endedSeptember 30, 2021 was primarily due to higher research and development costs, and increased use of cash to decrease accounts payable balances in the current period. 24
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Net cash used in operating activities for the nine months endedSeptember 30, 2021 consisted of a net loss of$48.6 million less non-cash adjustments of$12.6 million offset by changes in operating assets and liabilities of$6.6 million . Non-cash items primarily included stock-based compensation of$12.3 million . The net change in operating assets and liabilities was primarily due to an increase in prepaid expenses of$4.5 million , a net decrease in accounts payable and accrued expenses of$1.5 million , and an increase in amounts receivable of$0.6 million . Net cash used in operating activities during the nine months endedSeptember 30, 2020 consisted of a net loss of$52.0 million less non-cash adjustments of$35.4 million offset by net changes in operating assets and liabilities of$1.2 million . Non-cash items primarily included stock-based compensation of$35.2 million . The net change in operating assets and liabilities was primarily due to an increase in prepaid expenses of$2.5 million , and an increase in accounts receivable of$0.7 million , offset by a decrease in accounts payable of$2.0 million .
Cash flows from investing activities
Our primary investing activities consist of purchases and maturities of marketable securities, and purchases of property and equipment.
Net cash used in investing activities for the nine months endedSeptember 30, 2021 was$114.3 million , compared to net cash used in investing activities of$47.0 million for the nine months endedSeptember 30, 2020 . Cash used in investing activities increased by$67.3 million primarily due to increased net purchases of securities of$167.5 million for the nine months endedSeptember 30, 2021 as compared to$65.4 million during the nine months endedSeptember 30, 2020 . Proceeds received from maturities of securities were either reinvested or used to fund operations.
Cash flows from financing activities
We generated net cash from financing activities of$2.6 million during the nine months endedSeptember 30, 2021 , primarily related to proceeds from the exercise of stock options and warrants. We generated net cash from financing activities of$287.4 million during the nine months endedSeptember 30, 2020 , primarily from net proceeds from ourJanuary 2020 andSeptember 2020 common stock and preferred stock offerings of$275.1 million , proceeds from the exercise of warrants of$10.9 million , and proceeds from the exercise of stock options of$1.4 million .
Contractual Obligations
There have been no material changes to our contractual obligations and commitments described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSEC . We have entered into agreements in the normal course of business with CROs for clinical trials and contract manufacturing organization for supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. These contractual obligations are cancelable at any time by us, generally upon prior written notice to the vendor.
Off-balance sheet arrangements
We did not have, during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under applicable
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States , orU.S. GAAP. The preparation of these condensed consolidated financial statements in conformity 25
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withU.S. GAAP requires us to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, reported amounts of revenue and expenses during the reporting periods, and related disclosures in the accompanying notes. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, accrued clinical and contract research organization costs, and stock-based compensation expense, including the valuation of the stock option liability. We review our estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and may impact future periods. Actual results could differ materially from these estimates and assumptions.
Our critical accounting policies are those policies which require the most
significant judgments and estimates in the preparation of our condensed
consolidated financial statements. There were no material changes to our
critical accounting policies as reported in our Annual Report on Form 10-K for
the year ended
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements.
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