You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed financial
statements and related notes appearing in this Quarterly Report on Form 10-Q, as
well as the audited financial statements, notes and Management's Discussion and
Analysis of Financial Condition and Results of Operations, included in our
Annual Report on Form 10-K for the year ended December 31, 2020. This discussion
and other parts of this Quarterly Report on Form 10-Q contain forward-looking
statements that involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions. Our actual results could differ
materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in the section of this report entitled "Risk Factors." You
should carefully read the "Cautionary Note About Forward-Looking Statements" of
this Quarterly Report on Form 10-Q and "Risk Factors" sections of our Annual
Report on Form 10-K to gain an understanding of the important factors that could
cause actual results to differ materially from the results described below.
Overview
We are an innovative clinical-stage biotechnology company pioneering the
development of dual-sided fusion proteins as an entirely new class of biologic
medicine. We believe our approach has the potential to fundamentally transform
the therapeutic modulation of the immune system. We have created a novel
approach to immune-modulation by designing biologics with structural
characteristics that are not achievable by existing therapeutic modalities.
Compounds derived from our proprietary ARC® platform simultaneously inhibit
checkpoint molecules and activate costimulatory molecules within a single
therapeutic. Our initial product candidates are designed to be differentiated
therapeutics addressing molecular targets that are well characterized and
scientifically validated in immuno-oncology but are underexploited by current
treatment modalities.
Overview of Product Candidates
SL-172154
Our lead product candidate, SL-172154, has been rationally designed to
simultaneously inhibit the CD47/SIRP? checkpoint interaction to restore an
anti-tumor immune response and to activate the CD40 costimulatory receptor to
bolster an immune response.
We are currently conducting two Phase 1 clinical trials for SL-172154. The first
is designed to evaluate the safety, pharmacokinetics, pharmacodynamics and
anti-tumor activity of SL-172154 in patients with advanced, platinum resistant
ovarian cancer. In November 2021, at the 36th annual meeting of the Society for
Immunotherapy of Cancer, we announced initial data from 15 patients in the first
four dose-escalation cohorts from the monotherapy dose-escalation portion of
this Phase 1 clinical trial. We expect to announce additional data from this
ongoing monotherapy dose-escalation clinical trial in the second half of 2022.
We plan to initiate a Phase 1B clinical trial evaluating SL-172154 in
combination with liposomal doxorubicin in patients with ovarian cancer in the
first half of 2022.
We are also conducting a second Phase 1 clinical trial evaluating SL-172154 in
patients with cutaneous squamous cell carcinoma, or CSCC, or head and neck
squamous cell carcinoma, or HNSCC, and we expect to announce initial data from
the dose-escalation portion of this trial in the first half of 2022.
We intend to conduct a third clinical trial, designed to evaluate the safety,
pharmacokinetics, pharmacodynamics and anti-tumor activity of SL-172154 in
patients with acute myeloid leukemia, or AML, and higher-risk myelodysplastic
syndromes, or HR-MDS. We intend to study SL-172154 in a parallel staggered
dose-escalation monotherapy and combination Phase 1A/B clinical trial. In AML,
we intend to study SL-172154 in combination with azacitidine and venetoclax, and
in HR-MDS and TP53 mutant AML, we intend to study
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SL-172154 in combination with azacitidine. We expect to announce initial data
from this clinical trial in the second half of 2022.
We also intend to continue to evaluate other drug combination opportunities for
SL-172154 in ovarian cancer and other solid tumors.
SL-279252
Our product candidate, SL-279252, has been rationally designed to simultaneously
inhibit the PD-1/PD-L1 interaction and activate the OX40 receptor. We are
evaluating SL-279252 in a Phase 1 clinical trial in patients with advanced solid
tumors and lymphoma. In November 2021, at the 36th annual meeting of the Society
for Immunotherapy of Cancer, we announced initial data from 43 patients in the
first ten dose-escalation cohorts of this clinical trial. We intend to continue
the dose-escalation portion of this ongoing Phase 1 clinical trial through
additional dose levels and expect to announce additional data from the
dose-escalation portion of this clinical trial in the second half of 2022.
ARC Platform
In addition to our clinical-stage ARC product candidates, our ARC platform is
highly modular, and we possess a deep pipeline of preclinical immuno-oncology
product candidates. We anticipate nominating an additional ARC-derived product
candidate for clinical development in the first half of 2022. Longer-term, we
may pursue additional disease areas, including autoimmune diseases, where we
believe our dual-sided fusion protein platforms may provide advantages over
current treatment modalities.
GADLEN Platform
In alignment with our strategy to leverage our expertise and intellectual
property to build and expand novel platforms beyond our ARC platform, where
dual-sided fusion proteins may provide advantages over existing therapeutic
antibodies, we continue to invest in and advance our Gamma Delta T Cell Engager
platform, known as GADLEN.
Overview of Operations
Since our inception in 2016, we have devoted substantially all of our resources
to developing and perfecting our intellectual property rights, conducting
research and development activities, including undertaking preclinical studies
of our product candidates, conducting clinical trials of our most advanced
product candidates, manufacturing our product candidates, organizing and
staffing our company, business planning and raising capital. We do not have any
products approved for sale, and we have not generated any revenue from product
sales. We have funded our operations as of the filing date of this Quarterly
Report on Form 10-Q through the net proceeds from our IPO of approximately
$213.5 million, the sale of redeemable convertible preferred stock for
approximately $152.9 million, the issuance of convertible notes for
approximately $10.5 million and payments received pursuant to our collaboration
agreement with Takeda for approximately $82.0 million.
For the nine months ended September 30, 2021 and 2020, our net loss was
$52.8 million and $24.6 million, respectively. We have not been profitable since
inception, and as of September 30, 2021, we had an accumulated deficit of
$124.9 million and $290.2 million in cash and cash equivalents and short-term
investments, respectively. We expect to continue to incur significant expenses
and increasing operating losses in the near term. We expect our expenses will
increase substantially in connection with our ongoing activities, as we:
•continue to advance the preclinical and clinical development of our
clinical-stage product candidates, SL-172154 and SL-279252;
•initiate preclinical studies and clinical trials for additional product
candidates that we may identify in the future;
•expand our operational, financial and management systems;
•increase personnel and infrastructure to support our clinical development,
research and manufacturing efforts;
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•build out and expand our in-house process development and manufacturing
capabilities;
•continue to develop, perfect and defend our intellectual property portfolio;
and
•incur additional legal, accounting or other expenses in operating our business,
including the additional costs associated with operating as a public company.
We do not expect to generate significant product revenue unless and until we
successfully complete development and obtain regulatory and marketing approval
of, and begin to sell, one or more of our product candidates, which we expect
will take several years. We expect to spend a significant amount in development
and marketing costs prior to such time. We may never succeed in achieving
regulatory and marketing approval for our product candidates. We may obtain
unexpected results from our preclinical and clinical trials. We may elect to
discontinue, delay or modify preclinical and clinical trials of our product
candidates. A change in the outcome of any of these variables with respect to
the development of a product candidate could mean a significant change in the
costs and timing associated with the development of that product candidate.
Accordingly, until such time as we can generate significant product revenue, if
ever, we expect to continue to seek private or public equity and debt financing
to meet our capital requirements. There can be no assurance that such funding
may be available to us on acceptable terms, or at all, or that we will be able
to commercialize our product candidates. In addition, we may not be profitable
even if we commercialize any of our product candidates.
COVID-19 Pandemic
There is significant uncertainty as to the future effects of the ongoing
COVID-19 pandemic, which may, among other things, materially impact our
business, including our ongoing and planned clinical trials. We have
experienced, and expect to continue to experience, delays in our SL-172154 and
SL-279252 clinical trials as a result of the ongoing pandemic. Our manufacturing
operations have been impacted by the ongoing pandemic, including delays with our
third-party manufacturer and difficulties in obtaining raw materials needed to
manufacture material for our clinical trials. Additionally, we have experienced,
and expect to continue to experience, delays in enrolling patients, missed
treatments for enrolled patients, and performance delays from certain
third-party vendors supporting the SL-172154 and SL-279252 clinical trials,
although the significance of any future delays is difficult to predict.
Further, due to public health guidance measures, we have in the past and may in
the future implement a work-from-home policy for our employees, excluding those
necessary to maintain minimum basic operations, which may negatively impact
productivity, or disrupt, delay or otherwise adversely impact our business. For
example, some of our research activities that require our personnel to be in our
laboratories may be delayed. We may also experience delays or disruptions to our
operations if and when our employees need to take time off work due to illness
or other COVID-19-related impacts to our workforce.
Due to the impact of the COVID-19 pandemic and work-from-home policies and other
operational limitations mandated by federal, state and local governments as a
result of the pandemic, certain of our research and development activities,
including the conduct of preclinical studies, have been delayed and may be
further delayed and other aspects of our business, such as the conduct of
various corporate functions and the ability of our Board and management to
provide oversight and guidance may be adversely impacted until such operational
limitations are lifted. The COVID-19 pandemic or local outbreaks associated with
the COVID-19 pandemic could result in difficulty manufacturing our product
candidates, securing clinical trial site locations, CROs, and/or trial monitors
and other critical vendors and consultants supporting our clinical trials. In
addition, outbreaks or the perception of an outbreak near a clinical trial site
location could impact our ability to enroll patients or to complete all
scheduled physician visits for currently enrolled patients. These situations, or
others associated with COVID-19 pandemic, could cause delays in our clinical
trial plans and could increase expected costs, all of which could have a
material adverse effect on our business and its financial condition. At the
current time, we are unable to quantify the potential effects of the COVID-19
pandemic on our future operations.
Collaboration Agreement
On August 8, 2017, we entered into a Collaboration Agreement with Millennium
Pharmaceuticals, Inc., or Takeda, a wholly-owned subsidiary of Takeda
Pharmaceutical Company, Ltd., or the Collaboration Agreement. The Collaboration
Agreement was subsequently amended in April 2018, October 2018 and March 2020.
The Collaboration Agreement was mutually terminated pursuant to the termination
agreement, or the Termination
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Agreement, dated November 8, 2021. Under the terms of the Termination Agreement,
we are not required to satisfy any remaining performance obligations, we will
not make any payments to or receive any future milestone or royalty payments
from Takeda, and all options to license and rights of first negotiation held by
Takeda under the Collaboration Agreement were terminated. The termination of the
Collaboration Agreement is a type II subsequent event and, therefore, had no
impact to our financial statements as of September 30, 2021. The remaining
deferred revenue will be recognized as revenue in the fourth quarter of 2021.
Components of our Results of Operation
Collaboration Revenue
We have no products approved for commercial sale, and we have not generated any
revenue from commercial product sales. Our total revenue to date has been
generated solely from our Collaboration Agreement with Takeda, which was
terminated in November 2021. We expect that any collaboration revenue we
generate from any future collaboration partners will fluctuate from period to
period.
We have received cash of $3.6 million and $12.1 million for the nine months
ended September 30, 2021 and 2020, respectively, from Takeda under the
Collaboration Agreement. We have recognized total aggregate revenue of $51.9
million through September 30, 2021 under the Collaboration Agreement and expect
to recognize the remaining $30.1 million in the fourth quarter of 2021.
Operating Expense
Research and Development
Our research and development expenses consist primarily of costs incurred in
connection with the discovery and development of our product candidates. These
expenses include:
•expenses incurred under agreements with contract research organizations, or
CROs, as well as investigative sites and consultants that conduct our
preclinical studies and clinical trials;
•manufacturing and development expenses and the costs of acquiring and
manufacturing preclinical study and clinical trial materials;
•analysis of manufacturing processes for optimization;
•employee-related expenses, including salaries, benefits and stock-based
compensation;
•fees paid to consultants who assist with research and development activities;
•expenses relating to regulatory activities, including filing fees paid to
regulatory agencies;
•laboratory materials and supplies used to support our research activities; and
•allocated expenses for facility-related costs.
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The following table summarizes our research and development expenses by product candidate:

                                                Three Months Ended
                                                  September 30,            Nine Months Ended September 30,
(in thousands)                                              2021               2020                2021               2020
                                                                  (unaudited)                            (unaudited)
SL-172154                                               $   3,963          $    2,316          $  11,153          $   5,082
SL-279252                                                   2,298               5,401              7,913             12,080
Other pipeline candidates                                   4,608               1,941              9,778              4,408
Internal costs, including personnel
related benefits, facilities and
depreciation                                                4,268               2,146             11,512              6,126
                                                        $  15,137          $   11,804          $  40,356          $  27,696


Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect our research and development expenses to increase significantly over
the next several years as we conduct additional preclinical studies and clinical
trials, including later-stage clinical trials, for our current and future
product candidates and as we pursue regulatory approval of our product
candidates.
The process of conducting the necessary preclinical and clinical research to
obtain regulatory approval is costly and time consuming. The actual probability
of success for our product candidates may be affected by a variety of factors
including:
•the safety and efficacy of our product candidates;
•early clinical data for our product candidates;
•investment in our clinical programs;
•the ability of collaborators to successfully develop our licensed product
candidates;
•competition;
•manufacturing capability; and
•commercial viability.
We may never succeed in achieving regulatory approval for any of our product
candidates due to the uncertainties discussed above. 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 our product candidates, if ever.
General and Administrative Expense
General and administrative expense consists primarily of personnel expenses,
including salaries, benefits and stock-based compensation expense, for employees
and consultants in executive, finance, accounting, legal, information technology
and human resource functions. General and administrative expense also includes
corporate facility costs, including rent, utilities, depreciation and
maintenance, not otherwise included in research and development expense, as well
as legal fees related to intellectual property and corporate matters and fees
for accounting and consulting services.
We expect that our general and administrative expense will increase in the
future to support our growing research and development activities and as a
result of the increased costs of operating as a public company. These increases
will likely include increased costs related to the hiring of additional
personnel and fees to outside consultants, lawyers and accountants, among other
expenses. Additionally, we anticipate increased costs associated with being a
public company, including expenses related to services associated with
maintaining compliance with the requirements of Nasdaq and the Securities and
Exchange Commission, or SEC, insurance, and investor relations
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costs. If any of our current or future product candidates obtains regulatory
approval, we expect that we would incur significantly increased expenses
associated with building a sales and marketing team.
Interest Income
Interest income consists of interest earned on our cash, cash equivalents and
short-term investments, which consists of amounts held in a money market fund
and at various times in short-term government and corporate obligations.
Income Taxes
Since our inception, we have not recorded any income tax benefits for the net
operating losses, or NOLs, we have incurred or for our research and development
tax credits, as we believe, based upon the weight of available evidence, that it
is more likely than not that all of our NOLs and tax credits will not be
realized. Our NOLs and tax credit carryforwards will begin to expire in 2036. We
have recorded a full valuation allowance against our deferred tax assets at each
balance sheet date.
Results of Operations
Comparison of the Three Months Ended September 30, 2021 and 2020
The following table sets forth our results of operations for the three months
ended September 30, 2021 and 2020.
                                                     Three Months Ended September 30,                       Change
(in thousands)                                           2021                2020              Dollar              Percentage
                                                               (unaudited)
Collaboration revenue                               $     1,900          $    2,435          $   (535)                     22.0  %
Operating expenses:
Research and development                                 15,137              11,804             3,333                      28.2  %
General and administrative                                4,343               2,470             1,873                      75.8  %
Loss from operations                                    (17,580)            (11,839)           (5,741)                     48.5  %
Other income (expense):
Interest income                                             251                  86               165                     191.9  %
Other                                                       (81)                (76)               (5)                      6.6  %
Net loss                                            $   (17,410)         $  (11,829)         $ (5,581)                     47.2  %


Collaboration Revenue
Collaboration revenue decreased by $0.5 million, or 22.0%, to $1.9 million for
the three months ended September 30, 2021 from $2.4 million for the three months
ended September 30, 2020. The decrease in collaboration revenue was primarily
attributable to a decrease in manufacturing and process development on SL-279252
associated with the Collaboration Agreement.
Research and Development Expense
Research and development expenses increased by $3.3 million, or 28.2%, to
$15.1 million for the three months ended September 30, 2021 from $11.8 million
for the three months ended September 30, 2020. The increase was primarily due to
an increase of $1.8 million as a result of an increase in headcount and
expansion of our manufacturing and clinical development capabilities, an
increase of $1.6 million in clinical, assay development and preclinical pipeline
costs and an increase of $0.7 million in laboratory related costs, offset by a
decrease of $0.8 million in manufacturing costs.
General and Administrative Expense
General and administrative expenses increased by $1.9 million, or 75.8%, to
$4.3 million for the three months ended September 30, 2021 from $2.5 million for
the three months ended September 30, 2020. The increase was primarily due to an
increase of $1.0 million in personnel-related costs driven by higher employee
headcount needed
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to support our growing research and development activities and an increase of
$0.7 million of costs associated with being a public company.
Interest Income
Interest income increased by $0.2 million to $0.3 million for the three months
ended September 30, 2021 from $0.1 million for the three months ended
September 30, 2020. The increase was primarily due to an increase in short-term
investments in 2021 compared to 2020.
Results of Operations
Comparison of the Nine Months Ended September 30, 2021 and 2020
The following table sets forth our results of operations for the nine months
ended September 30, 2021 and 2020.
                                                        Nine Months Ended September 30,                           Change
(in thousands)                                             2021                   2020               Dollar              Percentage
                                                                  (unaudited)
Collaboration revenue                               $            (61)         $    8,592          $  (8,653)                   (100.7) %
Operating expenses:
Research and development                                      40,356              27,696             12,660                      45.7  %
General and administrative                                    14,098               5,816              8,282                     142.4  %
Loss from operations                                         (54,515)            (24,920)           (29,595)                    118.8  %
Other income (expense):
Interest income                                                1,947                 474              1,473                     310.8  %
Other                                                           (253)               (145)              (108)                     74.5  %
Net loss                                            $        (52,821)         $  (24,591)         $ (28,230)                    114.8  %


Collaboration Revenue
Collaboration revenue decreased by $8.7 million, or (100.7)%, to $(0.1) million
for the nine months ended September 30, 2021 from $8.6 million for the nine
months ended September 30, 2020. We recognize revenue related to the development
of SL-279252 under the Collaboration Agreement on a cost-based input method. In
the second quarter of 2021, in connection with our modifications to the
SL-279252 clinical development plan and our intention to expand the
dose-escalation portion of the ongoing Phase 1 clinical trial, the expected
program costs related to the SL-279252 development program increased. The
increase in the expected total cost of the development program, or the
denominator in the cost-based input method, resulted in a one-time negative
revenue adjustment in the second quarter of 2021. Actual consideration received
and total revenue expected to be recognized in accordance with the development
of SL-279252 under the Collaboration Agreement remain unchanged.
Research and Development Expense
Research and development expenses increased by $12.7 million, or 45.7%, to
$40.4 million for the nine months ended September 30, 2021 from $27.7 million
for the nine months ended September 30, 2020. The increase was primarily due to
an increase of $4.6 million as a result of an increase in headcount and
expansion of our manufacturing and clinical development capabilities, an
increase of $2.7 million in clinical, assay development and preclinical pipeline
costs, an increase of $2.4 million in laboratory and facilities related costs,
an increase of $2.3 million in manufacturing costs and an increase of $0.4
million in depreciation.
General and Administrative Expense
General and administrative expenses increased by $8.3 million, or 142.4%, to
$14.1 million for the nine months ended September 30, 2021 from $5.8 million for
the nine months ended September 30, 2020. The increase was primarily due to an
increase of $4.5 million in personnel-related costs driven by higher employee
headcount needed to support our growing research and development activities and
an increase of $3.0 million of costs associated with being a public company.
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Interest Income
Interest income increased by $1.5 million to $1.9 million for the nine months
ended September 30, 2021 from $0.5 million for the nine months ended
September 30, 2020. The increase was primarily due to an increase in short-term
investments in 2021 compared to 2020.
Liquidity and Capital Resources
Since our inception, our primary sources of liquidity have been generated
through our Collaboration Agreement with Takeda and by sales of our preferred
stock and common stock, including our IPO. As of September 30, 2021, we had an
accumulated deficit of $124.9 million and $290.2 million of cash and cash
equivalents and short-term investments.
Capital Resources and Funding Requirements
Our primary uses of cash and cash equivalents and short-term investments are to
fund our operations, which consist primarily of research and development
expenditures related to our programs, product development costs, research
expenses, administrative support, capital expenditures related to bringing
in-house certain process
development and manufacturing capabilities and working capital requirements. We
anticipate incurring additional net losses and negative cash flows from
operations in the near future until such time, if ever, that we can generate
significant sales of our product candidates currently in development. Our future
funding requirements will depend on many factors, including:
•the scope, timing, progress and results of discovery, preclinical development,
laboratory testing and clinical trials for our product candidates;
•the costs of process development and scale-up of a commercially ready
manufacturing process to support registrational clinical trials;
•the costs of manufacturing our product candidates for clinical trials and in
preparation for marketing approval and commercialization;
•the extent to which we enter into collaborations or other arrangements with
additional third parties in order to further develop our product candidates;
•the costs of preparing, filing and prosecuting patent applications, maintaining
and enforcing our intellectual property rights and defending other intellectual
property-related claims;
•the costs and fees associated with the discovery, acquisition or in-license of
additional product candidates or technologies;
•our ability to establish additional collaborations on favorable terms, if at
all;
•the costs required to scale up our clinical, regulatory and manufacturing
capabilities;
•the costs of future commercialization activities, if any, including
establishing sales, marketing, manufacturing, distribution and storage
capabilities, for any of our product candidates for which we receive marketing
approval; and
•revenue, if any, received from commercial sales of our product candidates,
should any of our product candidates receive marketing approval.
Until we obtain regulatory approval to market our product candidates, if ever,
we cannot generate revenues from sales of our products. Even if we are able to
sell our products, we may not generate a sufficient amount of product revenues
to finance our cash requirements. Accordingly, we may seek to raise additional
capital through equity offerings and/or debt financings or from other potential
sources of liquidity, which may include new collaborations, licensing or other
commercial agreements for one or more of our development programs or patent
portfolios. There can be no assurance that such funding may be available to us
on acceptable terms, or at all. The issuance of equity securities may result in
dilution to stockholders and the issuance of debt securities may have rights,
preferences and privileges senior to those of our common stock and the terms of
any such debt securities could impose significant restrictions on our
operations. The failure to raise funds as and when needed could have a negative
impact on our financial condition and ability to pursue our business strategies.
Additionally, if additional
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funding is not secured when required, we may need to delay or curtail our
operations until such funding is received, which would have a material adverse
impact on our business prospects and results of operations.
We believe that our cash and cash equivalents and short-term investments as of
September 30, 2021 are sufficient to fund projected operations into the second
half of 2024. The reduction in cash runway guidance from our last issued
guidance is primarily attributable to increased clinical activities for
SL-172154 and ongoing process development and manufacturing to support our
ongoing and future clinical trials, including the development of a commercially
ready manufacturing process in preparation for registrational clinical trials.
Cash Flows
The following table shows a summary of our cash flows for the periods indicated:
                                                                  Nine Months Ended September 30,
(in thousands)                                                        2021                2020
                                                                            (unaudited)
Net cash used in operating activities                             $  (38,399)         $ (19,616)
Net cash (used in) provided by investing activities                  (36,044)            25,166
Net cash provided by financing activities                              1,639            116,037
Net (decrease) increase in cash and cash equivalents              $  

(72,804) $ 121,587


Net Cash Used in Operating Activities
During the nine months ended September 30, 2021, net cash used in operating
activities was $38.4 million and primarily reflected our net loss of
$52.8 million, offset by noncash charges of $4.3 million in stock-based
compensation and $1.7 million in depreciation expense and accretion of
short-term investments and a $8.4 million net increase in our operating assets
and liabilities.
During the nine months ended September 30, 2020, net cash used in operating
activities was $19.6 million and primarily reflected our net loss of
$24.6 million, partially offset by noncash charges of $0.6 million in
stock-based compensation and $0.4 million in depreciation expense and a
$3.9 million net increase in our operating assets and liabilities.
Net Cash (Used in) Provided by Investing Activities
During the nine months ended September 30, 2021, net cash used in investing
activities was $36.0 million, of which $165.1 million was used to purchase
short-term investments, $135.0 million was received from the sale of short-term
investments and $5.9 million was used to purchase property and equipment,
primarily attributable to our continued efforts to bring in-house certain
process development, manufacturing and laboratory capabilities.
During the nine months ended September 30, 2020, net cash provided by investing
activities was $25.2 million, of which $31.3 million was received from the sale
and maturities of short-term investments, $5.6 million was used to purchase
short-term investments and $0.5 million was used to purchase property and
equipment.
Net Cash Provided by Financing Activities
During the nine months ended September 30, 2021, net cash provided by financing
activities was primarily from the exercise of stock options and ESPP purchases.
During the nine months ended September 30, 2020, net cash provided by financing
activities was $116.0 million and was primarily from the sale of our Series B
and Series B-1 redeemable convertible preferred stock.
Contractual Obligations and Other Commitments
There have been no material changes from the Contractual Obligations and Other
Commitments disclosed in Item 7 of our Annual Report on Form 10-K for the year
ended December 31, 2020.
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Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any
relationships with unconsolidated entities or financial partnerships, including
entities sometimes referred to as structured finance or special purpose entities
that were established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes. We do not engage
in off-balance sheet financing arrangements. In addition, we do not engage in
trading activities involving non-exchange traded contracts. We, therefore,
believe that we are not materially exposed to any financing, liquidity, market
or credit risk that could arise if we had engaged in these relationships.
Critical Accounting Policies
Our management's discussion and analysis of our financial condition and results
of operations are based on our financial statements, which have been prepared in
accordance with GAAP. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities and expenses and the disclosure of contingent assets and liabilities
in our financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to revenue recognition, the accrual for
research and development expenses, and the valuation of stock-based awards. We
base our estimates on historical experience, known trends and events, and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Our critical accounting policies are those policies which require the most
significant judgments and estimates in the preparation of our financial
statements. We believe that the assumptions and estimates associated with our
most critical accounting policies are those relating to revenue, accrued
research and development costs and stock-based compensation.
There have been no material changes in our critical accounting policies and
estimates as compared to the critical accounting policies and estimates
disclosed in Management's Discussion and Analysis of Financial Condition and
Results of Operations included in our Annual Report on Form 10-K for the year
ended December 31, 2020.
Recent Accounting Pronouncements
See Note 2 to our financial statements found elsewhere in this Quarterly Report
on Form 10-Q for a description of recent accounting pronouncements applicable to
our financial statements.
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company as defined in the JOBS Act. Under the JOBS
Act, an emerging growth company can take advantage of the extended transition
period for complying with new or revised accounting standards and delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have elected to avail ourselves of this exemption
from complying with new or revised accounting standards and, therefore, will not
be subject to the same new or revised accounting standards as other public
companies that are not emerging growth companies. As a result, our financial
statements may not be comparable to companies that comply with new or revised
accounting pronouncements as of public company effective dates.
We have evaluated the benefits of relying on other exemptions and reduced
reporting requirements under the JOBS Act. Subject to certain conditions, as an
emerging growth company, we may rely on certain of these exemptions, including
without limitation exemptions to the requirements for (1) providing an auditor's
attestation report on our system of internal controls over financial reporting
pursuant to Section 404(b) of the Sarbanes-Oxley Act and (2) complying with any
requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements,
known as the auditor discussion and analysis. We will remain an emerging growth
company until the earlier of (a) the last day of the fiscal year (i) following
the fifth anniversary of the completion of our initial public offering, (ii) in
which we have total annual gross revenues of at least $1.07 billion or (iii) in
which we are deemed to be a "large accelerated filer" under the rules of the
SEC, which
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means the market value of our common stock that is held by non-affiliates
exceeds $700.0 million as of the prior June 30th or (b) the date on which we
have issued more than $1.0 billion in non-convertible debt during the prior
three-year period.
We are also a "smaller reporting company" as defined under the Exchange Act. We
may continue to be a smaller reporting company if either (i) the market value of
our stock held by non-affiliates is less than $250.0 million or (ii) our annual
revenue is less than $100.0 million during the most recently completed fiscal
year and the market value of our stock held by non-affiliates is less than
$700.0 million. If we are a smaller reporting company at the time we cease to be
an emerging growth company, we may continue to rely on exemptions from certain
disclosure requirements that are available to smaller reporting companies.
Specifically, as a smaller reporting company we may choose to present only the
two most recent fiscal years of audited financial statements in our Annual
Report on Form 10-K and, similar to emerging growth companies, smaller reporting
companies have reduced disclosure obligations regarding executive compensation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company, as defined by Rule 12b-2 under the
Securities and Exchange Act of 1934 and in Item 10(f)(1) of Regulation S-K, and
are not required to provide the information under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and
our principal financial officer, evaluated, as of the end of the period covered
by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure
controls and procedures. Based on this evaluation of our disclosure controls and
procedures as of September 30, 2021, our principal executive officer and
principal financial officer concluded that our disclosure controls and
procedures as of such date are effective at the reasonable assurance level. The
term "disclosure controls and procedures," as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange
Act, means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act are recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by
us in the reports we file or submit under the Exchange Act is accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving their objectives and our management necessarily applies its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during
the third quarter of the year ending December 31, 2021 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

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