aimt-10q_20160930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-37519

 

AIMMUNE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

45-2748244

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

8000 Marina Blvd., Suite 300

Brisbane, California  94005

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (650) 614-5220

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

  (do not check if a smaller reporting company)

 

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of October 31, 2016, the registrant had 42,382,643 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


AIMMUNE THERAPEUTICS, INC.

 TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I. – FINANCIAL INFORMATION

 

3

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

3

 

 

Condensed Consolidated Balance Sheets as of September 30, 2016, and December 31, 2015

 

3

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Quarters and Nine Months Ended September 30, 2016 and 2015

 

4

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015

 

5

 

 

Notes to Condensed Consolidated Financial Statements

 

6

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

13

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

21

Item 4.

 

Controls and Procedures

 

21

 

 

 

 

 

PART II. – OTHER INFORMATION

 

22

Item 1.

 

Legal Proceedings

 

22

Item 1A.

 

Risk Factors

 

22

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

55

Item 3.

 

Defaults Upon Senior Securities

 

55

Item 4.

 

Mine Safety Disclosures

 

55

Item 5.

 

Other Information

 

55

Item 6.

 

Exhibits

 

55

SIGNATURES

 

56

EXHIBIT INDEX

 

57

 

 

 

 


 

PART I. – FINANCIAL INFORMATION

Item 1. Financial Statements

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

(unaudited)

 

 

Note 1

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

76,911

 

 

$

76,677

 

Short-term investments

 

 

73,332

 

 

 

115,158

 

Prepaid expenses and other current assets

 

 

2,338

 

 

 

5,622

 

Total current assets

 

 

152,581

 

 

 

197,457

 

Long-term investments

 

 

9,012

 

 

 

7,992

 

Property and equipment, net

 

 

9,034

 

 

 

2,702

 

Prepaid expenses and other assets

 

 

3,100

 

 

 

4,210

 

Total assets

 

$

173,727

 

 

$

212,361

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,470

 

 

$

1,863

 

Accrued liabilities

 

 

10,249

 

 

 

3,118

 

Other current liabilities

 

 

128

 

 

 

117

 

Total current liabilities

 

 

11,847

 

 

 

5,098

 

Other liabilities

 

 

1,381

 

 

 

1,012

 

Total liabilities

 

 

13,228

 

 

 

6,110

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, par value $0.0001 per share—290,000 shares authorized as of

  September 30, 2016, and December 31, 2015; 42,349 and 42,239 shares issued and

  outstanding as of September 30, 2016, and December 31, 2015, respectively

  (including 244 and 599 shares subject to repurchase, legally issued and

  outstanding as of September 30, 2016, and December 31, 2015, respectively)

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

269,562

 

 

 

259,668

 

Accumulated other comprehensive income (loss)

 

 

14

 

 

 

(88

)

Accumulated deficit

 

 

(109,081

)

 

 

(53,333

)

Total stockholders’ equity

 

 

160,499

 

 

 

206,251

 

Total liabilities and stockholders’ equity

 

$

173,727

 

 

$

212,361

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3


 

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

15,888

 

 

$

3,850

 

 

$

37,684

 

 

$

9,050

 

General and administrative

 

 

6,353

 

 

 

5,174

 

 

 

18,542

 

 

 

10,792

 

Total operating expenses

 

 

22,241

 

 

 

9,024

 

 

 

56,226

 

 

 

19,842

 

Loss from operations

 

 

(22,241

)

 

 

(9,024

)

 

 

(56,226

)

 

 

(19,842

)

Interest income, net

 

 

155

 

 

 

33

 

 

 

478

 

 

 

34

 

Net loss

 

$

(22,086

)

 

$

(8,991

)

 

$

(55,748

)

 

$

(19,808

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on investments

 

 

(17

)

 

 

(2

)

 

 

102

 

 

 

(2

)

Comprehensive loss

 

$

(22,103

)

 

$

(8,993

)

 

$

(55,646

)

 

$

(19,810

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

 

$

(0.53

)

 

$

(0.36

)

 

$

(1.33

)

 

$

(1.73

)

Weighted average shares used in computing net loss per common

  share, basic and diluted

 

 

41,997

 

 

 

25,149

 

 

 

41,831

 

 

 

11,447

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4


 

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(55,748

)

 

$

(19,808

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation expense

 

 

393

 

 

 

60

 

Stock-based compensation expense

 

 

9,093

 

 

 

2,751

 

Investment premium amortization, net

 

 

748

 

 

 

57

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

4,384

 

 

 

(1,072

)

Other assets

 

 

38

 

 

 

(285

)

Accounts payable

 

 

(393

)

 

 

536

 

Accrued liabilities

 

 

7,131

 

 

 

590

 

Other liabilities

 

 

352

 

 

 

73

 

Net cash used in operating activities

 

 

(34,002

)

 

 

(17,098

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(6,725

)

 

 

(1,091

)

Purchase of investments

 

 

(103,537

)

 

 

(106,790

)

Maturities of investments

 

 

143,697

 

 

 

 

Change in restricted cash

 

 

 

 

 

(60

)

Net cash provided by (used in) investing activities

 

 

33,435

 

 

 

(107,941

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

 

 

 

168,117

 

Net proceeds from issuance of Series B convertible preferred stock, net of

  issuance costs

 

 

 

 

 

79,779

 

Repurchase of Series A convertible preferred stock

 

 

 

 

 

(12,874

)

Net cash proceeds from exercise of stock options, including early exercise

 

 

801

 

 

 

409

 

Net cash provided by financing activities

 

 

801

 

 

 

235,431

 

Net increase (decrease) in cash and cash equivalents

 

 

234

 

 

 

110,392

 

Cash and cash equivalents at the beginning of the period

 

 

76,677

 

 

 

2,269

 

Cash and cash equivalents at the end of the period

 

$

76,911

 

 

$

112,661

 

Supplemental schedule of non-cash investing and financing activities

 

 

 

 

 

 

 

 

Conversion of convertible preferred stock to common stock at closing of initial public

  offering

 

$

 

 

$

83,833

 

Capital expenditures funded through long term lease obligation

 

$

 

 

$

711

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

5


 

AIMMUNE THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2016

(Unaudited)

 

1. Formation and Business of the Company

Aimmune Therapeutics, Inc., or the Company, formerly known as Allergen Research Corporation, is a clinical-stage biopharmaceutical company advancing a new therapeutic approach, including the development of proprietary product candidates, for the treatment of peanut and other food allergies. Our therapeutic approach, which we refer to as Characterized Oral Desensitization Immunotherapy, or CODITTM, is a system designed to desensitize patients to food allergens using rigorously characterized biologic products, defined treatment protocols and tailored support services. We are headquartered in Brisbane, California, and were incorporated in the state of Delaware on June 24, 2011.

Since inception, we have incurred net losses and negative cash flows from operations. During the nine months ended September 30, 2016, we incurred a net loss of $55.7 million and used $34.0 million of cash in operations. As of September 30, 2016, we had an accumulated deficit of $109.1 million, and we do not expect to experience positive cash flows in our near future. We have financed our operations to date primarily through private placements of equity securities and an initial public offering, or IPO, of common stock in August 2015. Our ability to continue to meet our obligations and to achieve our business objectives is dependent upon a number of factors, which include raising additional capital, obtaining U.S. Food and Drug Administration, or FDA, and European Medicines Agency, or EMA, approval and commercializing in the United States and Europe, generating sufficient revenue, and our ability to continue to control expenses, if necessary, to meet our obligations as they become due for the foreseeable future. Failure to obtain FDA and EMA approval, commercialize our lead product candidate, manage discretionary expenditures, or raise additional financing, as required, may adversely impact our ability to achieve our intended business objectives.

2. Summary of Significant Accounting Policies

Basis of Preparation

The accompanying condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles, or GAAP, in the United States and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2015, has been derived from audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements have been prepared on the same basis as our annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of our financial information. The results of operations for the quarter and nine months ended September 30, 2016, are not necessarily indicative of the results to be expected for the year ending December 31, 2016, or for any other interim period or for any other future year. We operate in one reportable segment.

The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2015, included in our Annual Report on Form 10-K filed with the SEC.

Basis of Consolidation

The accompanying condensed consolidated financial statements include the accounts of our wholly-owned subsidiaries. All significant intercompany transactions have been eliminated.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of costs and expenses during the reporting period. We base our estimates and assumptions on historical experience when available and on various factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results could differ from these estimates under different assumptions or conditions.

 

6


 

Initial Public Offering

On August 5, 2015, our registration statement on Form S-1 (File No. 333-205501) relating to the IPO of our common stock became effective. The IPO closed on August 11, 2015, at which time we issued 11,499,999 shares of our common stock at a price of $16.00 per share, which included 1,499,999 shares sold pursuant to the exercise of the underwriters’ option to purchase additional shares. We received proceeds of $168.1 million, net of underwriting discounts and commissions and offering expenses. In addition, upon our IPO, all outstanding shares of convertible preferred stock converted by their terms into 25.1 million shares of common stock. As of September 30, 2016, we had 42,349,337 shares of common stock outstanding.  In conjunction with our IPO, we filed our amended and restated certificate of incorporation that authorized 290,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred stock, $0.0001 par value per share.

Stock Split

On July 30, 2015, we effected a 1-for-1.317 stock split of our common stock and convertible preferred stock. The par value of the authorized stock was not adjusted as a result of the stock split. In addition, we increased the number of authorized shares of common stock to 55,051,264 and the number of authorized shares of preferred stock to 25,051,264. All issued and outstanding common stock, convertible preferred stock, stock options and per share amounts contained in the accompanying condensed consolidated financial statements and the accompanying notes have been retroactively adjusted to give effect to the stock split for all periods presented.

Significant Accounting Policies

There have been no significant changes to the accounting policies during the quarter and nine months ended September 30, 2016, as compared to the significant accounting policies described in Note 2 of the “Notes to Financial Statements” in our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015.

Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, companies will have reduced diversity in the timing and content of footnote disclosures than under today’s guidance. ASU 2014-15 will be effective for annual periods ending after December 15, 2016, with early adoption permitted. We do not currently believe the impact of adopting ASU 2014-15 on our consolidated financial statements will be material.

In February 2016, the Financial Accounting Standards Board, or FASB, issued ASU No. 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The standard is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The new standard is expected to impact our consolidated financial statements as we have certain operating lease arrangements for which we are the lessee. We are currently evaluating the impact the adoption of this new standard will have on our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and accounting for forfeitures. The new standard is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years with early adoption permitted. We are currently evaluating the impact that the adoption of this new standard will have on our consolidated financial statements.

 

7


 

3. Available-for-Sale Securities and Fair Value Measurements

We define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Our valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. We classify these inputs into the following hierarchy:

 

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

 

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

 

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The following table sets forth our financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

 

 

September 30, 2016

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market funds

 

$

67,213

 

 

$

 

 

$

 

 

$

67,213

 

Commercial paper

 

 

 

 

 

9,698

 

 

 

 

 

 

9,698

 

Total cash and cash equivalents

 

$

67,213

 

 

$

9,698

 

 

$

 

 

$

76,911

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency securities

 

$

 

 

$

47,753

 

 

$

 

 

$

47,753

 

Corporate securities

 

 

 

 

 

15,355

 

 

 

 

 

 

15,355

 

Commercial paper

 

 

 

 

 

9,218

 

 

 

 

 

 

9,218

 

U.S. government securities

 

 

 

 

 

10,018

 

 

 

 

 

 

10,018

 

Total investments

 

$

 

 

$

82,344

 

 

$

 

 

$

82,344

 

 

 

 

December 31, 2015

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market funds

 

$

61,477

 

 

$

 

 

$

 

 

$

61,477

 

Agency securities

 

 

 

 

 

9,701

 

 

 

 

 

 

9,701

 

Corporate securities

 

 

 

 

 

2,000

 

 

 

 

 

 

2,000

 

Commercial paper

 

 

 

 

 

3,499

 

 

 

 

 

 

3,499

 

Total cash and cash equivalents

 

$

61,477

 

 

$

15,200

 

 

$

 

 

$

76,677

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

$

100

 

 

$

 

 

$

 

 

$

100

 

Agency securities

 

 

 

 

 

43,325

 

 

 

 

 

 

43,325

 

Corporate securities

 

 

 

 

 

49,596

 

 

 

 

 

 

49,596

 

Commercial paper

 

 

 

 

 

17,843

 

 

 

 

 

 

17,843

 

U.S. government securities

 

 

 

 

 

12,286

 

 

 

 

 

 

12,286

 

Total investments

 

$

100

 

 

$

123,050

 

 

$

 

 

$

123,150

 

 

 

Our valuation techniques used to measure the fair value of money market funds were derived from quoted prices in active markets for identical assets. The valuation techniques used to measure the fair value of investments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. Investments are carried at fair value. During the quarter and nine months ended September 30, 2016, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.

 

8


 

The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by security type, classified in cash equivalents and investments, are as follows (in thousands):

 

 

 

September 30, 2016

 

 

 

Amortized

Cost

 

 

Gross

Unrealized Gains

 

 

Gross

Unrealized Losses

 

 

Total

Fair Value

 

Agency securities

 

$

47,738

 

 

$

22

 

 

$

(7

)

 

$

47,753

 

Corporate securities

 

 

15,363

 

 

 

 

 

 

(8

)

 

 

15,355

 

Commercial paper

 

 

18,916

 

 

 

 

 

 

 

 

 

18,916

 

U.S. government securities

 

 

10,011

 

 

 

8

 

 

 

(1

)

 

 

10,018

 

Total available-for-sale investments

 

$

92,028

 

 

$

30

 

 

$

(16

)

 

$

92,042

 

 

 

 

December 31, 2015

 

 

 

Amortized

Cost

 

 

Gross

unrealized gains

 

 

Gross

unrealized losses

 

 

Total

fair value

 

Agency securities

 

$

53,062

 

 

$

2

 

 

$

(38

)

 

$

53,026

 

Corporate securities

 

 

51,626

 

 

 

28

 

 

 

(58

)

 

 

51,596

 

Commercial paper

 

 

21,342

 

 

 

 

 

 

 

 

 

21,342

 

U.S. government securities

 

 

12,308

 

 

 

 

 

 

(22

)

 

 

12,286

 

Total available-for-sale investments

 

$

138,338

 

 

$

30

 

 

$

(118

)

 

$

138,250

 

 

At September 30, 2016, all of the available-for-sale securities have contractual maturities within two years. We periodically review our available-for-sale investments for other-than-temporary impairment loss. We consider factors such as the duration, severity and the reason for the decline in value, the potential recovery period and our intent to sell. For debt securities, we also consider whether (i) it is more likely than not that we will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. During the quarter and nine months ended September 30, 2016, we did not recognize any other-than-temporary impairment loss. All marketable securities with unrealized losses have been in a loss position for less than twelve months.

 

 

4. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

 

 

 

September 30, 2016

 

 

December 31, 2015

 

Furniture and equipment

 

$

776

 

 

$

220

 

Computer equipment

 

 

836

 

 

 

324

 

Manufacturing equipment

 

 

674

 

 

 

458

 

Construction in progress

 

 

7,293

 

 

 

1,853

 

Property and equipment

 

 

9,579

 

 

 

2,855

 

Less: accumulated depreciation

 

 

(545

)

 

 

(153

)

Property and equipment, net

 

$

9,034

 

 

$

2,702

 

 

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

September 30, 2016

 

 

December 31, 2015

 

Compensation and benefits

 

$

2,221

 

 

$

1,645

 

Research and development

 

 

7,123

 

 

 

972

 

Professional and consulting

 

 

729

 

 

 

381

 

Other

 

 

176

 

 

 

120

 

Total accrued liabilities

 

$

10,249

 

 

$

3,118

 

 

 

9


 

5. Commitments and Contingencies

Indemnifications

We indemnify each of our officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws. The term of the indemnification period lasts as long as an officer or a director may be subject to any proceeding arising out of acts or omissions of such officer or director in such capacity. The maximum amount of potential future indemnification is unlimited; however, we currently hold director and officer liability insurance. This insurance allows the transfer of risk associated with our exposure and may enable us to recover a portion of any future amounts paid. We believe that the fair value of these indemnification obligations is minimal. Accordingly, we have not recognized any liabilities relating to these obligations for any period.

Legal

We are currently not a party to any material legal proceedings. During the normal course of business, we may be a party to legal claims that may not be covered by insurance. We do not believe that any such claims would have a material impact on our consolidated financial statements.

 

 

6. Stock-Based Compensation

Equity Incentive Plan

In January 2013, we adopted our Stock Plan (the “2013 Plan”) and in July 2015, we adopted a new Stock Plan (the “2015 Plan”). Upon consummation of our IPO, the 2013 Plan was terminated and no further shares are reserved for issuance under the 2013 Plan.  As of September 30, 2016, there were 4.4 million shares reserved for future issuance under the 2015 Plan. As of September 30, 2016, there were 3.6 million shares subject to outstanding options under the 2013 Plan.

The 2013 Plan allowed employees to exercise stock options in exchange for cash before the requisite service was provided (e.g., before the award is vested under its original terms); however, such arrangements permit us to subsequently repurchase such shares at the exercise price if the vesting conditions are not satisfied. Such an exercise is not substantive for accounting purposes. Therefore, the payment received by us for the exercise price is recognized as an early exercise liability on the consolidated balance sheets and will be transferred to common stock and additional paid-in capital as such shares vest. As of September 30, 2016, and December 31, 2015, 243,505 and 599,242 unvested shares were legally issued and outstanding, respectively. In connection with these unvested shares, we have recorded an early exercise liability as of September 30, 2016, of $94,000, of which $82,000 is included in other current liabilities and $12,000 is included in other non-current liabilities in the condensed consolidated balance sheet. These shares are excluded from basic and diluted net loss per share until our repurchase right lapses and the shares are no longer subject to the repurchase feature.

Option activity under the 2015 Plan and 2013 Plan is set forth below:

 

 

 

Options Outstanding

 

 

 

Number of

Options

and Unvested

Shares

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual Life

(in years)

 

 

Aggregate

Intrinsic

Value

(in thousands)

 

Balance, December 31, 2015

 

 

4,814,892

 

 

$

5.20

 

 

 

9.23

 

 

 

64,211

 

Options granted

 

 

2,181,775

 

 

$

15.48

 

 

 

 

 

 

 

 

 

Options exercised and shares vested

 

 

(466,174

)

 

$

4.08

 

 

 

 

 

 

 

 

 

Options cancelled and retired

 

 

(134,000

)

 

$

0.14

 

 

 

 

 

 

 

 

 

Options cancelled

 

 

(439,654

)

 

$

10.09

 

 

 

 

 

 

 

 

 

Balance, September 30, 2016

 

 

5,956,839

 

 

$

8.99

 

 

 

9.24

 

 

$

35,773

 

Options vested and expected to vest as of

   September 30, 2016

 

 

5,714,718

 

 

$

8.90

 

 

 

8.87

 

 

$

34,851

 

Options exercisable as of September 30, 2016

 

 

3,725,971

 

 

$

5.00

 

 

 

8.84

 

 

$

37,274

 

 

 

10


 

The aggregate intrinsic values of options outstanding, exercisable, and vested and expected to vest were calculated as the difference between the exercise price of the options and the market price for shares of our common stock as of September 30, 2016. The 2013 Plan provided for early exercise, therefore, all our outstanding stock options issued under that plan are exercisable.

As of September 30, 2016 and 2015, there was $29.2 million and $5.7 million of unrecognized stock-based compensation expense related to stock options, which is expected to be recognized over the weighted-average remaining vesting period of 2.9 years and 3.6 years, respectively.

Restricted stock unit, or RSU, activity under the 2015 Plan is set forth below:

 

 

 

Shares

 

 

Weighted

Average Grant

Date Fair

Value

 

Unvested Balance, December 31, 2015

 

 

 

 

$

 

Granted

 

 

17,000

 

 

 

14.01

 

Forfeited

 

 

 

 

 

 

Vested

 

 

 

 

 

 

Unvested Balance, September 30, 2016

 

 

17,000

 

 

$

14.01

 

 

RSUs are measured based on the fair market value of the underlying stock on the date of grant and recognized as expense on a straight-line basis over the employee’s requisite service period (generally the vesting period). As of September 30, 2016, there was $0.1 million of unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of 0.5 years.

Valuation Assumptions

The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model and the resulting weighted average fair value of stock options granted were as follows:

 

 

 

Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Expected term (in years)

 

 

6.1

 

 

 

6.0

 

 

 

6.0

 

 

 

6.0

 

Expected volatility

 

 

75.9

%

 

 

71.2

%

 

 

74.5

%

 

 

74.5

%

Risk free interest rate

 

 

1.1

%

 

 

1.8

%

 

 

1.7

%

 

 

1.7

%

Dividend yield

 

 

%

 

 

%

 

 

 

 

 

%

Weighted average estimated fair value

 

$

9.61

 

 

$

10.32

 

 

$

10.19

 

 

$

5.86

 

Stock-Based Compensation Expense

Stock-based compensation expense, net of estimated forfeitures, reflected in the statements of operations and comprehensive loss is as follows (in thousands):

 

 

 

Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Research and development

 

$

1,493

 

 

$

300

 

 

$

3,710

 

 

$

396

 

General and administrative

 

 

1,995

 

 

 

1,462

 

 

 

5,383

 

 

 

2,355

 

Total stock-based compensation expense

 

$

3,488

 

 

$

1,762

 

 

$

9,093

 

 

$

2,751

 

 

During the quarter and nine months ended September 30, 2016, we recorded $0.5 million and $0.6 million, respectively, of stock-based compensation expense related to the acceleration of vesting of certain former executives’ stock options.  During the quarter and nine months ended September 30, 2015, we recorded $0 and $0.6 million, respectively, of stock-based compensation expense related to the acceleration of vesting of certain former executives’ stock options.

 

 

11


 

7. Net Loss per Share

Basic net loss per share is calculated based on the weighted-average number of common shares outstanding during the periods presented. For periods in which we have generated a net loss, basic and diluted net loss per share are the same due to the requirement to exclude potentially dilutive securities, consisting of common shares underlying outstanding stock options and restricted stock units,  which would have an anti-dilutive effect on net loss per share.

The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because their inclusion would have been antidilutive:

 

 

 

Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Convertible preferred stock

 

 

 

 

 

11,436,443

 

 

 

 

 

 

22,289,679

 

Stock options and restricted stock units

 

 

5,973,839

 

 

 

1,198,209

 

 

 

5,973,839

 

 

 

4,871,078

 

 

 

8. Subsequent Event

On November 4, 2016, we announced a $145.0 million equity investment in the Company by Nestlé Health Science S.A. and the entry into a strategic collaboration designed to enable the development and commercialization of innovative food allergy therapies.

On November 3, 2016, we entered into a securities purchase agreement (the “Purchase Agreement”) with Nestlé Health Science US Holdings, Inc. (“NHSc US”), pursuant to which we agreed to issue and sell to NHSc US 7,552,084 shares (“the Shares”) of our common stock, par value $0.0001 (“Common Stock”), at a price of $19.20 per share or aggregate cash purchase price of $145.0 million. The Shares represent 15.12% of our outstanding Common Stock. The closing of the sale and issuance of the Shares is subject to certain closing conditions, including the delivery of the aggregate purchase price, delivery of an executed Registration Rights Agreement, and Standstill Agreement, in each case, between the Company and NHSc, and the expiration or termination of any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

In connection with the strategic collaboration, on November 3, 2016, we entered into a Strategic Collaboration Agreement (the “Strategic Collaboration Agreement”) with Nestec, Ltd., a limited company organized and existing under the laws of Switzerland (“Nestec”). Pursuant to the Strategic Collaboration Agreement, we and Nestec (through itself and one or more affiliated entities) agreed to collaborate with one another in connection with the development of our products, including by (i) sharing information relating to our activities directed towards the development of our products for the treatment of allergies to one or more particular types of food (the “Development Programs”) and (ii) providing us access to Nestec’s scientific, clinical, regulatory and commercial expertise relevant to such Development Programs.  The Strategic Collaboration Agreement becomes effective upon the closing of the equity investment.

We announced the equity investment, and related contractual agreements, and the strategic collaboration in a Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 4, 2016, The Current Report sets forth a summary of the material terms and conditions of the equity investment, and related contractual agreements, and the strategic collaboration.  

 

12


 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes thereto for the year ended December 31, 2015, included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission on March 3, 2016. This discussion and other parts of this report 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 titled “Risk Factors.” Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements.

Overview

We are a clinical-stage biopharmaceutical company advancing a new therapeutic approach, including the development of proprietary product candidates, for the treatment of peanut and other food allergies. Our therapeutic approach, which we refer to as Characterized Oral Desensitization Immunotherapy, or CODITTM, is a system designed to desensitize patients to food allergens using rigorously characterized biologic products, defined treatment protocols and tailored support services.  In our Phase 2 studies of our lead CODIT product candidate, AR101, 43 of the 44 patients who completed the AR101 treatment regimen were desensitized to a clinically meaningful level of peanut protein of at least 443 mg, a level that substantially exceeds the amount of peanut protein typically encountered in an accidental exposure. We initiated PALISADE (Peanut Allergy Oral Immunotherapy Study of AR101 for Desensitization in Children and Adults), our pivotal Phase 3 trial of AR101, in December 2015, and anticipate topline data from PALISADE will be available in the fourth quarter of 2017.  In September 2016, we announced early completion of North American target enrollment for PALISADE, and we also announced that RAMSES (Real-World AR101 Market-Supporting Experience Study), a new clinical study designed to bolster real-world experience with AR101, will begin enrolling patients in the first quarter of 2017.

AR101 has been granted Fast Track designation and Breakthrough Therapy designation in children and adolescents (ages 4 to 17) by the U.S. Food and Drug Administration, or FDA, and, if our clinical development plan is successfully completed, we intend to file a Biologics License Application, or BLA, with the FDA and a Marketing Authorization Application, or MAA, with the European Medicines Agency, or EMA. We have worldwide commercial rights to all of our product candidates and, if approved, currently intend to commercialize in the United States and Europe with our own specialty sales force.

Since commencing our operations in 2011, substantially all of our efforts have been focused on research, development and the advancement of our lead CODIT product candidate, AR101. We have not generated any revenue from product sales and, as a result, we have incurred significant losses. We incurred a net loss of $55.7 million and used $34.0 million of cash in operations for the nine months ended September 30, 2016. As of September 30, 2016, our accumulated deficit was $109.1 million. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our development of, seek regulatory approval for, and begin to commercialize AR101, and as we develop other product candidates.

As a result of our Breakthrough Therapy designation for AR101, we are provided more frequent communications with the FDA regarding the clinical development plan for AR101. These communications cover various aspects of the AR101 clinical development plan, including the size of the safety database required for an initial approval, the number of clinical trial subjects required for an initial approval in certain subgroups, and whether, based on our current clinical development plan, we will be required to conduct additional clinical trials prior to filing a BLA. Any additional clinical development requirements from the FDA could increase the costs of our clinical development program for AR101 and potentially delay our BLA submission timeline. In addition, we do not expect to generate revenue from product sales unless and until we successfully complete development of, obtain regulatory approval for, and begin to commercialize one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. Accordingly, we anticipate that we will need to raise additional capital to fund our future operations. Until such time that we can generate substantial revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings and debt financings, and we may seek to raise additional capital through strategic collaborations. However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our development programs or commercialization efforts, or grant to others rights to develop or market product candidates that we would otherwise prefer to develop and market ourselves. Failure to receive additional funding could cause us to cease operations, in part or in full. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations.

 

13


 

We currently utilize contract manufacturers for all of our manufacturing activities. In June 2015, we entered into a lease for a manufacturing facility in Clearwater, Florida, but do not expect manufacturing operations by our contract manufacturer to commence at that facility until early 2017. Additionally, we currently utilize third-party clinical research organizations, or CROs, to carry out our clinical trials, and we do not yet have a sales organization. We expect to significantly increase our investment in costs relating to our manufacturing process and sales organization as we prepare for the filing of a BLA with the FDA and a MAA with the EMA and prepare for a possible commercial launch of AR101.

Recent Developments

Initiation of RAMSES

In September 2016, we announced that we will begin enrolling patients in the RAMSES trial in early 2017. RAMSES is intended to continue to provide opportunities to patients and centers in the U.S. an opportunity to participate in the development of AR101, and reinforce the profile of AR101 in clinical practice. RAMSES is a 2:1 randomized, double-blind, placebo-controlled trial, which will not require an oral food challenge for entry. Instead, patients will be selected based on stringent entry criteria, including a well-documented medical history of IgE-mediated reactions to peanut (including anaphylaxis), skin reactivity, and analyses of peanut-specific immunological markers. The study will monitor treatment-emergent adverse events during the initial six-month dosing period and thereafter. We expects that the absence of an entry food challenge may further improve the tolerability profile of AR101 in early stages of dosing by removing exposure to high levels of peanut allergen that may otherwise prime the immune system prior to treatment.

Equity Investment and Strategic Collaboration

On November 4, 2016, we announced a $145.0 million equity investment in the Company by Nestlé Health Science S.A. and the entry into a strategic collaboration designed to enable the development and commercialization of innovative food allergy therapies.

On November 3, 2016, we entered into a securities purchase agreement (the “Purchase Agreement”) with Nestlé Health Science US Holdings, Inc. (“NHSc US”), pursuant to which we agreed to issue and sell to NHSc US 7,552,084 shares (“the Shares”) of our common stock, par value $0.0001 (“Common Stock”), at a price of $19.20 per share or aggregate cash purchase price of $145.0 million. The Shares represent 15.12% of our outstanding Common Stock. The closing of the sale and issuance of the Shares is subject to certain closing conditions, including the delivery of the aggregate purchase price, delivery of an executed Registration Rights Agreement, and Standstill Agreement, in each case, between the Company and NHSc, and the expiration or termination of any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

In connection with the strategic collaboration, on November 3, 2016, we entered into a Strategic Collaboration Agreement (the “Strategic Collaboration Agreement”) with Nestec, Ltd., a limited company organized and existing under the laws of Switzerland (“Nestec”). Pursuant to the Strategic Collaboration Agreement, we and Nestec (through itself and one or more affiliated entities) agreed to collaborate with one another in connection with the development of our products, including by (i) sharing information relating to our activities directed towards the development of our products for the treatment of allergies to one or more particular types of food (the “Development Programs”) and (ii) providing us access to Nestec’s scientific, clinical, regulatory and commercial expertise relevant to such Development Programs.  The Strategic Collaboration Agreement becomes effective upon the closing of the equity investment.

Critical Accounting Policies and Estimates

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 U.S. Generally Accepted Accounting Principles, or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on 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. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

There have been no new policies or significant changes to our critical accounting policies as disclosed in the critical accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2015.

 

14


 

Recent Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, companies will have reduced diversity in the timing and content of footnote disclosures than under today’s guidance. ASU 2014-15 will be effective for annual periods ending after December 15, 2016, with early adoption permitted. We do not currently believe the impact of adopting ASU 2014-15 on our consolidated financial statements will be material.

In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The standard is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The new standard is expected to impact our consolidated financial statements as we have certain operating lease arrangements for which we are the lessee. We are currently evaluating the impact the adoption of this new standard will have on our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and accounting for forfeitures. The new standard is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years with early adoption permitted. We are currently evaluating the impact that the adoption of this new standard will have on our consolidated financial statements.

Components of Results of Operations

Research and Development Expenses

The largest component of our total operating expenses has historically been our investment in research and development activities. Research and development expenses consist primarily of external-related expenses, employee-related expenses, stock-based compensation expense, and facilities and other costs, which include the following:

 

External-related expenses include: costs incurred to conduct research, such as the discovery and development of our product candidates; costs related to the production of clinical supplies, including fees paid to contract manufacturers; fees paid to consultants and vendors, including clinical research organizations in conjunction with implementing and monitoring our clinical trials and acquiring and evaluating clinical trial data, including all related fees, such as for investigator grants, patient screening fees, laboratory work and statistical compilation and analysis; costs for scientific conferences and meetings; and costs related to compliance with drug development regulatory requirements.

 

Employee-related costs include salaries, bonuses, severance and benefits for personnel in our research and development functions.

 

Stock-based compensation expense is expense associated with our equity plans for awards to personnel in our research and development functions.

 

Facilities and other costs include facilities-related rent, depreciation and other allocable expenses, which include general and administrative support functions and general supplies for our research and development activities.

We recognize all research and development expenses as they are incurred. Clinical trial, contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is performed.

 

15


 

General and Administrative Expenses

General and administrative expenses include employee-related costs, stock-based compensation expense, external professional services expenses, and facilities and other costs. Employee-related costs include salaries, bonuses, severance and benefits for personnel in our general and administrative functions. Stock-based compensation expense is expense associated with our equity plans for awards to personnel in our general and administrative functions. External professional services expenses consist of legal, accounting, and audit services and other consulting fees. Facilities and other costs consist of facilities-related rent, depreciation, and other allocable expenses, which include general and administrative support functions, general supplies and insurance costs.

Results of Operations

Comparison of the Quarters Ended September 30, 2016 and 2015

 

 

 

Quarter Ended September 30,

 

 

 

 

 

 

 

2016

 

 

2015

 

 

$ Change

 

 

 

(In thousands)

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

15,888

 

 

$

3,850

 

 

$

12,038

 

General and administrative

 

 

6,353

 

 

 

5,174

 

 

 

1,179

 

Total operating expenses

 

 

22,241

 

 

 

9,024

 

 

 

13,217

 

Loss from operations

 

 

(22,241

)

 

 

(9,024

)

 

 

(13,217

)

Interest income, net

 

 

155

 

 

 

33

 

 

 

122

 

Net loss

 

$

(22,086

)

 

$

(8,991

)

 

$

(13,095

)

 

Research and Development Expenses

The following table summarizes our research and development expenses incurred during the quarters ended September 30, 2016 and 2015

 

 

 

Quarter Ended September 30,

 

 

 

 

 

 

 

2016

 

 

2015

 

 

$ Change

 

 

 

(In thousands)

 

External-related expenses

 

$

11,609

 

 

$

2,002

 

 

$

9,607

 

Employee-related costs

 

 

2,180

 

 

 

1,429

 

 

 

751

 

Stock-based compensation expense

 

 

1,493

 

 

 

300

 

 

 

1,193

 

Facilities and other costs

 

 

606

 

 

 

119

 

 

 

487

 

Total research and development expenses

 

$

15,888

 

 

$

3,850

 

 

$

12,038

 

 

Research and development expenses for the quarter ended September 30, 2016, increased by $12.0 million compared to the quarter ended September 30, 2015, primarily due to external-related expenses, stock-based compensation expense, employee-related costs and facilities and other costs. External-related costs increased primarily due to activities related to enrolling patients in and conducting PALISADE, our pivotal Phase 3 clinical trial of AR101, which was initiated in late 2015, and contract manufacturing costs of AR101 for clinical trials. Stock-based compensation expense increased primarily due to increased headcount, higher valuation of stock options granted and expense related to the acceleration of vesting of certain former executives’ stock options. Employee-related costs increased primarily due to increased headcount to support continued development of AR101. Facilities and other costs increased primarily due to increased rent expense from our new facility leases and other allocable costs due to increased headcount.

We expect our research and development expenses to continue to increase as we continue to progress PALISADE, initiate Enrollment and other clinical activities related to RAMSES, expand our manufacturing capabilities for AR101, conduct additional clinical studies of AR101, and develop additional CODIT product candidates.

 

16


 

General and Administrative Expenses

The following table summarizes our general and administrative expenses incurred during the quarters ended September 30, 2016 and 2015:

 

 

 

Quarter Ended September 30,

 

 

 

 

 

 

 

2016

 

 

2015

 

 

$ Change

 

 

 

(In thousands)

 

Employee-related costs

 

$

1,838

 

 

$

1,339

 

 

$

499

 

Stock-based compensation expense

 

 

1,995

 

 

 

1,462

 

 

 

533

 

External professional services

 

 

2,015

 

 

 

2,068