10-Q 1 krys-20220930.htm 10-Q krys-20220930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________
FORM 10-Q
_____________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
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: 001-38210
_____________________________________________________
Krystal Biotech, Inc.
(Exact name of registrant as specified in its charter)
_____________________________________________________

Delaware82-1080209
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
2100 Wharton Street, Suite 701
Pittsburgh, Pennsylvania 15203
(Address of principal executive offices and zip code)
(412) 586-5830
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
_____________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange on which registered
Common StockKRYS
NASDAQ Capital Market
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 every Interactive Data File required to be submitted 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 such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company    
If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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, 2022, there were 25,747,647 shares of the registrant’s common stock issued and outstanding.



Krystal Biotech, Inc.
TABLE OF CONTENTS
  Page No.
  
  
  
 
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)
 
  
  
 
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)
 
  
 
 
 
  
 
   
 
 
 
 
 
 
 
   
 

2


PART I. FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS

Krystal Biotech, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands, except share and per share data)September 30,
2022
December 31,
2021
Assets
Current assets
Cash and cash equivalents$186,409 $341,246 
Short-term investments208,011 96,850 
Prepaid expenses and other current assets3,158 4,171 
Total current assets397,578 442,267 
Property and equipment, net157,786 112,355 
Long-term investments12,557 64,371 
Right-of-use assets8,253 7,228 
Other non-current assets205 74 
Total assets$576,379 $626,295 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$5,761 $8,398 
Current portion of lease liability1,547 1,041 
Accrued expenses and other current liabilities20,724 16,297 
Total current liabilities28,032 25,736 
Lease liability7,575 6,983 
Total liabilities35,607 32,719 
Commitments and contingencies (Note 6)
Stockholders' equity
Preferred stock; $0.00001 par value; 20,000,000 shares authorized at
   September 30, 2022 and December 31, 2021; 2,061,773
   shares issued, and no shares outstanding at September 30, 2022
   and December 31, 2021
  
Common stock; $0.00001 par value; 80,000,000 shares authorized a September 30, 2022 and December 31, 2021; 25,709,664 shares issued and outstanding at September 30, 2022; and 25,207,985 shares issued and outstanding at December 31, 2021
  
Additional paid-in capital790,954 734,523 
Accumulated other comprehensive loss(1,475)(163)
Accumulated deficit(248,707)(140,784)
Total stockholders' equity540,772 593,576 
Total liabilities and stockholders' equity$576,379 $626,295 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


Krystal Biotech, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)

 Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands, except share and per share data)2022202120222021
Expenses
Research and development$11,516 $6,080 $31,720 $18,875 
General and administrative19,935 9,572 53,705 27,524 
Litigation settlement  25,000  
Total operating expenses31,451 15,652 110,425 46,399 
Loss from operations(31,451)(15,652)(110,425)(46,399)
Other Income (Expense)
Interest and other income, net1,601 63 2,502 127 
Interest expense   (1,492)
Net loss$(29,850)(15,589)(107,923)(47,764)
Unrealized gain (loss) on available-for-sale securities and currency translation adjustment70 7 (1,312)(20)
Comprehensive loss$(29,780)$(15,582)$(109,235)$(47,784)
Net loss per common share:
   Basic and diluted
$(1.17)$(0.70)$(4.24)$(2.18)
Weighted-average common shares outstanding:
   Basic and diluted
25,619,125 22,212,266 25,428,097 21,893,656 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


Krystal Biotech, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(unaudited)
 Common StockAdditional Paid-inAccumulated Other ComprehensiveAccumulatedTotal
Stockholders'
(In thousands, except shares)SharesAmountCapitalIncome (Loss)DeficitEquity
Balances at January 1, 202225,207,985 $ $734,523 $(163)$(140,784)$593,576 
Issuance of common stock, net1,475 — 55 — — 55 
Shares surrendered for taxes and forfeitures(10,379)— (649)— — (649)
Stock-based compensation expense— — 6,571 — — 6,571 
Unrealized gain (loss) on investments and other— — — (1,034)— (1,034)
Net loss— — — — (49,965)(49,965)
Balances at March 31, 202225,199,081 $ $740,500 $(1,197)$(190,749)$548,554 
Issuance of common stock, net472,706 — 30,748 — — 30,748 
Shares surrendered for taxes and forfeitures(7,500)— — — — — 
Stock-based compensation expense— — 8,335 — — 8,335 
Unrealized gain (loss) on investments and other— — — (348)— (348)
Net loss— — — — (28,108)(28,108)
Balances at June 30, 2022
25,664,287 $ $779,583 $(1,545)$(218,857)$559,181 
Issuance of common stock, net45,377 — 2,176 — — 2,176 
Stock-based compensation expense— — 9,195 — — 9,195 
Unrealized gain (loss) on investments and other— — — 70 — 70 
Net loss— — — — (29,850)(29,850)
Balances at September 30, 2022
25,709,664 $ $790,954 $(1,475)$(248,707)$540,772 
 Common StockAdditional Paid-inAccumulated Other Comprehensive AccumulatedTotal
Stockholders'
(In thousands, except shares)SharesAmountCapitalIncome (Loss)DeficitEquity
Balances at January 1, 202119,714,220 $ $363,292 $6 $(71,214)$292,084 
Issuance of common stock, net2,489,837 — 152,033 — — 152,033 
Stock-based compensation expense— — 2,350 — — 2,350 
Unrealized gain (loss) on investments and other— — — (3)— (3)
Net loss— — — — (15,812)(15,812)
Balances at March 31, 202122,204,057 $ $517,675 $3 $(87,026)$430,652 
Issuance of common stock, net975 — 14 — — 14 
Stock-based compensation expense— — 4,261 — — 4,261 
Unrealized gain (loss) on investments and other— — — (24)— (24)
Net loss— — — — (16,363)(16,363)
Balances at June 30, 2021
22,205,032 $ $521,950 $(21)$(103,389)$418,540 
Issuance of common stock, net32,952 — 1,534 — — 1,534 
Stock-based compensation expense— — 3,745 — — 3,745 
Unrealized gain (loss) on investments and other— — — 7 — 7 
Net loss— — — — (15,589)(15,589)
Balances at September 30, 2021
22,237,984 $ $527,229 $(14)$(118,978)$408,237 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


Krystal Biotech, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)

 Nine Months Ended
September 30,
(In thousands)20222021
Operating Activities
Net loss$(107,923)$(47,764)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization2,966 1,985 
Stock-based compensation expense23,678 10,174 
Loss on disposals of fixed assets22  
Non-cash interest expense 1,492 
Other, net(224)(224)
Changes in operating assets and liabilities
Prepaid expenses and other current assets1,031 1,038 
Other non-current assets(31) 
Lease liability(459)(240)
Accounts payable(316)(225)
Accrued expenses and other current liabilities3,016 6,726 
Net cash used in operating activities(78,240)(27,038)
Investing Activities
Purchases of property and equipment(47,762)(27,453)
Purchases of investments(214,712)(83,810)
Proceeds from maturities of investments153,599 11,033 
Net cash used in investing activities(108,875)(100,230)
Financing Activities
Issuance of common stock, net32,927 153,573 
Taxes paid related to settlement of restricted stock awards(649) 
Repayment of ASTRA build to suit liability (7,960)
Net cash provided by financing activities32,278 145,613 
Net (decrease) increase in cash and cash equivalents(154,837)18,345 
Cash and cash equivalents at beginning of period341,246 268,269 
Cash and cash equivalents at end of period$186,409 $286,614 
Supplemental Disclosures of Non-Cash Investing and Financing Activities
Unpaid purchases of property and equipment included in accounts payable and accrued expenses$15,305 $23,213 
Initial recognition of right-of-use assets1,556 4,396 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


Krystal Biotech, Inc.  
Notes to Condensed Consolidated Financial Statements
(unaudited)
1.    Organization
Krystal Biotech, Inc. (the “Company,” or “we” or other similar pronouns) commenced operations on April 15, 2016. On March 31, 2017, the Company converted from a California limited liability company to a Delaware C-corporation, and changed its name from Krystal Biotech LLC to Krystal Biotech, Inc. On June 19, 2018, the Company incorporated Krystal Australia Pty Ltd., an Australian proprietary limited company, a wholly-owned subsidiary, for the purpose of undertaking preclinical and clinical studies in Australia. On April 23, 2019, the Company incorporated Jeune Aesthetics, Inc., formerly known as Jeune, Inc. ("Jeune"), in Delaware, a wholly-owned subsidiary, for the purpose of undertaking preclinical and clinical studies for aesthetic skin conditions. On January 7, 2022 and August 25, 2022, the Company incorporated Krystal Biotech Switzerland GmbH and Krystal Biotech Netherlands, B.V., respectively, for the purpose of establishing initial operations in Europe for the development and commercialization of Krystal's pipeline.
We are a biotechnology company focused on developing and commercializing genetic medicines for patients with rare diseases. Using our patented platform that is based on engineered HSV-1, we create vectors that efficiently deliver therapeutic transgenes to cells of interest in multiple organ systems. The cell’s own machinery then transcribes and translates the encoded effector to treat or prevent disease. We formulate our vectors for non-invasive or minimally invasive routes of administration at a healthcare professional’s office or potentially in the patient’s home by a healthcare professional. Our goal is to develop easy-to-use medicines to dramatically improve the lives of patients living with rare diseases and chronic conditions. Our innovative technology platform is supported by in-house, commercial scale current good manufacturing practices ("cGMP") manufacturing capabilities.
Liquidity
As of September 30, 2022, the Company had an accumulated deficit of $248.7 million. With the net proceeds raised from its public offerings, the Company believes that its cash, cash equivalents and short-term investments of approximately $394.4 million as of September 30, 2022 will be sufficient to allow the Company to fund its planned operations for at least the next 12 months from the date of this Quarterly Report on Form 10-Q. As the Company continues to incur losses, a transition to profitability is dependent upon the successful development, approval and commercialization of its product candidates and the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability and unless and until it does, the Company will continue to need to raise additional capital or obtain financing from other sources. Management intends to fund future operations through the sale of equity and debt financings and may also seek additional capital through arrangements with strategic partners or other sources. There can be no assurance that additional funding will be available on terms acceptable to the Company, if at all.
The Company is subject to risks common to companies in the biotechnology industry, including but not limited to the failure of product candidates in clinical and preclinical studies, the development of competing product candidates or other technological innovations by competitors, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to commercialize product candidates.
2.    Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). In the opinion of management, all adjustments, which consist of all normal recurring adjustments necessary for a fair presentation of the Company's financial position and results of operations for the interim periods presented, are reflected in the interim condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassified amounts have no impact on the Company’s previously reported financial position or results of operation.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on February 28, 2022.
7


Risks and Uncertainties
The coronavirus ("COVID-19") pandemic has resulted, and is likely to continue to result, in significant national and global economic uncertainty and may adversely affect the Company's business. The Company is continuing to actively monitor the impact of the COVID-19 pandemic and the related effects on its financial condition, liquidity, operations, suppliers, industry, and workforce. The full extent, consequences, and duration of the COVID-19 pandemic and the resulting impact on the Company cannot currently be predicted. The Company will continue to evaluate the impact that the pandemic could have on the operations, financial position, and the results of operations and cash flows during fiscal year 2022.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements. Estimates are used in the following areas including stock-based compensation expense, accrued expenses, the fair value of financial instruments, the incremental borrowing rate for lease liabilities, and the valuation allowance included in the deferred income tax calculation.
Segment and Geographical Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company and the Company’s chief operating decision maker view the Company’s operations and manage its business in one operating segment, which is the business of developing and commercializing pharmaceutical products.  
Concentrations of Credit Risk and Off-Balance Sheet Risk
Financial instruments that potentially subject the Company to credit risk consist of cash, cash equivalents and investments. The Company’s policy is to invest its cash, cash equivalents and investments in money market funds, corporate bonds, commercial paper, government agency securities and various other bank deposit accounts. The counterparties to the agreements relating to the Company’s investments consist of financial institutions of high credit standing. The Company is exposed to credit risk in the event of default by the financial institutions to the extent amounts recorded on the condensed consolidated balance sheets are in excess of insured limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. The Company has no financial instruments with off-balance sheet risk of loss.
Cash, Cash Equivalents and Investments
Cash and cash equivalents consist of money market funds and bank deposits. Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase.
Investments with maturities of less than one year are classified as short-term investments on the condensed consolidated balance sheets and consist of commercial paper, corporate bonds, and government agency securities. Investments with maturities of greater than one year are classified as long-term investments on the condensed consolidated balance sheets and consist of corporate bonds and government agency securities. Accrued interest on corporate bonds and government agency securities are also classified as short-term investments.
As our entire investment portfolio is considered available for use in current operations, we classify all investments as available-for-sale securities. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive loss, which is a separate component of stockholders’ equity in the condensed consolidated balance sheets.
8


Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a three-level hierarchy that prioritizes the inputs used in determining fair value by their reliability and preferred use, as follows:
Level 1— Valuations based on quoted prices in active markets for identical assets or liabilities.
Level 2— Valuations based on quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data.
Level 3— Valuations based on inputs that are both significant to the fair value measurement and unobservable.
To the extent that a valuation is based on models or inputs that are less observable, or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized within Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
There have been no significant changes to the valuation methods utilized by the Company during the periods presented. There have been no transfers between Level 1, Level 2, and Level 3 in any periods presented.
The carrying amounts of financial instruments consisting of cash and cash equivalents, investments, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities included in the Company’s condensed consolidated financial statements, are reasonable estimates of fair value, primarily due to their short maturities.
Our available-for-sale, short-term and long-term investments, which consist of commercial paper, corporate bonds, and U.S. government agency securities are considered to be Level 2 valuations. The fair value of Level 2 financial assets is determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data, such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis.
Property and Equipment, net
Property and equipment, net, is stated at cost, less accumulated depreciation. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred, while costs of major additions and betterments are capitalized. Upon disposal, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets, which are as follows:
Computer equipment and software
3 - 7 years
Laboratory and manufacturing equipment
3 - 20 years
Furniture and fixtures
3 - 7 years
Leasehold improvementlesser of remaining useful life or remaining lease term
The Company reviews the estimated useful lives of its property and equipment on a continuing basis. In evaluating the useful lives, the Company considers how long assets will remain functionally effective, whether the technology continues to be relevant and considers other competitive and economic factors. If the assessment indicates that the assets will be used for a shorter or longer period than previously anticipated, the useful life of the assets is adjusted, resulting in a change in estimate. Changes in estimates are accounted for on a prospective basis by depreciating the current carrying values of the assets over their revised remaining useful lives.

The review performed by the Company in the current year indicated that certain pieces of lab equipment would be functional for a longer term than previously estimated and as a result, the Company increased the useful lives of these assets from 7 to 15 years. This change was effective and accounted for prospectively beginning in Q3 2022. The effect of this change in useful life estimate did not result in a material change to depreciation expense.
Construction in progress ("CIP") is not depreciated until the asset is placed in service.
9


Impairment of Long-Lived Assets
The Company evaluates long-lived assets for potential impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount of the asset. The Company has not recognized any impairment losses for the three and nine months ended September 30, 2022 and 2021, respectively.
Leases
The Company accounts for its lease agreements in accordance with FASB ASC Topic 842, Leases. Right-of-use lease assets represent the right to use an underlying asset during the lease term and the lease obligations represent the commitment to make lease payments arising from the lease. Right-of-use lease assets and obligations are recognized based on the present value of remaining lease payments over the lease term. As the Company’s existing lease agreements do not provide an implicit rate and as the Company does not have any external borrowings, the Company has used an estimated incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments.  Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for the payment is incurred. In addition, the Company also has made an accounting policy election to exclude leases with an initial term of twelve months or less from its balance sheet and to account for lease and non-lease components of its operating leases as a single component.
For lease arrangements where it has been determined that the Company has control over an asset that is under construction and is thus considered the accounting owner of the asset during the construction period, the Company records a construction in progress asset and corresponding financial obligation on the condensed consolidated balance sheet. Once the construction is complete, an assessment is performed to determine whether the lease meets certain sale-leaseback criteria. If the sale-leaseback criteria are determined to be met, the Company will remove the asset and related financial obligation from the condensed consolidated balance sheet and treat the lease as either an operating or finance lease based on an assessment of the guidance. If, upon completion of construction, the project does not meet the "sale-leaseback" criteria, the lease will be treated as a financing obligation and the Company will depreciate the asset over its estimated useful life for financial reporting purposes once the asset has been placed into service.
Research and Development Expenses
Research and development costs are charged to expense as incurred in performing research and development activities. These costs include employee compensation costs, facilities and overhead, preclinical and clinical activities, clinical manufacturing costs, contract management services, regulatory and other related costs.
The Company estimates contract research and clinical trials materials manufacturing expenses based on the services performed pursuant to contracts with research organizations and manufacturing organizations that manufacture materials used in the Company’s ongoing preclinical and clinical studies. Non-refundable advanced payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. These estimates are based on communications with the third-party service providers and the Company’s estimates of accrued expenses using information available at each balance sheet date. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly.
Stock-Based Compensation Expense
The Company applies the fair value recognition provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification, or ASC, Topic 718, Compensation—Stock Compensation ("ASC 718"), to account for stock-based compensation. Compensation costs related to stock options granted are based on the estimated fair value of the awards on the date of grant.
ASC 718 requires all stock-based payments, including grants of stock options and restricted stock, to be recognized in the consolidated statements of operations based on their grant-date fair values. Compensation expense is recognized on a straight-line basis based on the grant-date fair value over the associated service period of the award, which is generally the vesting term.
The Company estimates the fair value of its stock options using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including: (i) the expected stock price volatility; (ii) the expected term of the award; (iii) the risk-free interest rate; and (iv) expected dividends. Once the Company's own sufficient historical volatility data was
10


obtained, the Company eliminated the use of a representative peer group and began using only its own historical volatility data in its estimate of expected volatility.
The Company estimates the expected term of its stock options using the “simplified” method, whereby the expected term equals the arithmetic mean of the vesting term and the original contractual term of the option. The risk-free interest rates are based on US Treasury securities with a maturity date commensurate with the expected term of the associated award. The Company has never paid and does not expect to pay dividends in the foreseeable future. The Company accounts for forfeitures as they occur. Stock-based compensation expense recognized in the financial statements is based on awards for which service conditions are expected to be satisfied.
Comprehensive Loss
Comprehensive loss is defined as the change in equity during a period from transactions from non-owner sources. Unrealized gains or losses on available-for-sale securities is a component of other comprehensive gains or losses. We have not recorded any reclassifications from other comprehensive gains or losses to net loss during any period presented.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other accounting standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the adoption of recently issued standards have or may have a material impact on the condensed consolidated statements or disclosures.
3.    Net Loss Per Share Attributable to Common Stockholders
Basic net loss per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted-average number of shares of common stock and common share equivalents outstanding for the period. Common share equivalents consist of common stock issuable upon exercise of stock options and vesting of restricted stock awards. There were 3,565,110 and 1,900,638 common share equivalents outstanding as of September 30, 2022 and 2021, respectively, in the form of stock options and unvested restricted stock awards, that have been excluded from the calculation of diluted net loss per common share as their effect would be anti-dilutive for all periods presented.

Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands, except share and per share data)2022202120222021
Numerator: 
Net loss$(29,850)$(15,589)$(107,923)$(47,764)
Denominator:
Weighted-average basic and
   diluted common shares
25,619,125 22,212,266 25,428,097 21,893,656 
Basic and diluted net loss per
   common share
$(1.17)$(0.70)$(4.24)$(2.18)

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4.    Fair Value Instruments
The following tables show the Company’s cash, cash equivalents and available-for-sale securities by significant investment category as of September 30, 2022 and December 31, 2021, respectively (in thousands):
 September 30, 2022
 Amortized CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate Fair
Value
Cash and Cash
Equivalents
Short-term
Marketable
Securities (1)
Long-term
Marketable
Securities (2)
Level 1:       
Cash and cash equivalents$186,409 $— $— $186,409 $186,409 $— $— 
Subtotal186,409 — — 186,409 186,409 — — 
Level 2:
Commercial paper52,777 2 (41)52,738 — 52,738  
Corporate bonds94,415  (886)93,529 — 87,291 6,238 
U.S. government agency securities74,824 36 (559)74,301 — 67,982 6,319 
Subtotal222,016 38 (1,486)220,568 — 208,011 12,557 
Total$408,425 $38 $(1,486)$406,977 $186,409 $208,011 $12,557 
 December 31, 2021
 Amortized CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate Fair
Value
Cash and Cash
Equivalents
Short-term
Marketable
Securities (1)
Long-term
Marketable
Securities (2)
Level 1:       
Cash and cash equivalents$341,246 $— $— $341,246 $341,246 $— $— 
Subtotal341,246 — — 341,246 341,246 — — 
Level 2:
Commercial paper40,469 1 (4)40,466 — 40,466  
Corporate bonds83,300 10 (114)83,196 — 35,768 47,428 
U.S. government agency securities37,621  (62)37,559 — 20,616 16,943 
Subtotal161,390 11 (180)161,221 — 96,850 64,371 
Total$502,636 $11 $(180)$502,467 $341,246 $96,850 $64,371 
(1)The Company’s short-term marketable securities mature in one year or less.
(2)The Company's long-term marketable securities mature between one year and two years.
See Note 2 to these unaudited condensed consolidated financial statements for additional discussion regarding the Company’s fair value measurements.
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5.    Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consist of the following (in thousands):
 September 30,
2022
December 31,
2021
Construction in progress$130,071 $104,340 
Leasehold improvements21,503 5,723 
Furniture and fixtures949 891 
Computer equipment and software96 85 
Laboratory and manufacturing equipment10,968 5,530 
Total property and equipment163,587 116,569 
Accumulated depreciation(5,801)(4,214)
Property and equipment, net$157,786 $112,355 
Depreciation expense was $669 thousand and $1.6 million for the three and nine months ended September 30, 2022 and $474 thousand and $1.4 million for the three and nine months ended September 30, 2021, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
 September 30,
2022
December 31,
2021
Accrued construction in progress$10,905 $9,606 
Accrued professional fees2,960 2,011 
Accrued payroll and benefits3,934 2,882 
Accrued preclinical and clinical expenses2,325 1,602 
Accrued financing costs10 26 
Accrued taxes122 83 
Other current liabilities468 87 
Total$20,724 $16,297 
6.    Commitments and Contingencies
Significant Contracts and Agreements
Lease Agreements
On May 26, 2016, the Company signed an operating lease for laboratory and office space that commenced in June 2016 and was scheduled to expire on October 31, 2017 (the “2016 Lease”). The 2016 Lease has been amended several times to increase the area leased, which currently consists of approximately 47,000 square feet and includes the commercial scale cGMP-compliant manufacturing facility, ANCORIS. As a result of the lease amendments, the 2016 Lease expiration date was extended to October 31, 2031. On September 30, 2022, the Company amended the 2016 Lease ("Short-Term Amendment") to add a short-term lease for additional office space that commenced on October 1, 2022 and expires on September 30, 2023. The amendment increased the area leased by approximately 7,000 square feet through September 30, 2023, resulting in a total area leased of approximately 54,000 square feet.
On December 26, 2019, the Company entered into a lease agreement for a second commercial gene therapy facility ("ASTRA") in the Pittsburgh, Pennsylvania area ("ASTRA lease") with Northfield I, LLC (the "Landlord", "Northfield", or "Lessor") with an initial lease term that expired on October 31, 2035. The ASTRA lease contained an option ("Purchase Option") to purchase the building, related improvements and take corresponding assignment of the Landlord's rights under its existing Ground Lease (the "Ground Lease").
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On October 5, 2020, the Company was provided with notice that the initial delivery conditions of the building had been met, including completion of the building shell, interior slab, and exterior doors, and on October 15, 2020, the Company gave the Landlord notice of its intent to purchase ASTRA for approximately $9.4 million, subject to the parties entering into a commercially reasonable purchase and sale agreement. As a result of the Company's ability to exercise its option to purchase ASTRA, the Company obtained control over the construction in progress of ASTRA as of October 5, 2020. The Company recorded a $10.0 million CIP asset and a corresponding build to suit lease liability related to the costs incurred by the Landlord, offset by the previous cash contributions of $2.4 million.
On January 29, 2021, the Company entered into a Purchase and Sale Agreement ("PSA") for ASTRA with Northfield related to the purchase option exercised by the Company on October 15, 2020, for a purchase price of $9.4 million. The Company held approximately $1.5 million on deposit with Northfield under the existing lease agreement and applied this deposit as a credit against the purchase price at closing. On February 1, 2021, Northfield delivered the space as substantially complete and made the space available for access by the Company, thus triggering lease commencement. As a result, the Company concluded that this transaction did not qualify for sale-leaseback accounting because it did not meet the definition of a sale. As control did not transfer to the Lessor at lease commencement, the transaction continued to be accounted for as construction in progress and a financing obligation. On March 5, 2021, the purchase closed and the Company determined that reclassification of the construction in progress to buildings and leasehold improvements was not appropriate as the interior of the building was not yet ready for its intended use. The building continues to be held under construction in progress as of September 30, 2022. The interior of the building is currently under construction and is expected to be completed in 1H 2023. From construction completion to the closing of the purchase, the Company recognized interest expense to accrete the financial obligation to a balance that equaled the cash consideration that was paid upon the close of purchase. For more information about the expected construction costs associated with ASTRA, see "ASTRA Contractual Obligations" below.
As part of the transaction, the Company also became the accounting owner of the Ground Lease, due to obtaining control over ASTRA, and recorded the applicable operating right-of-use asset and corresponding lease liability as of October 5, 2020. When the PSA was finalized, the Company took assignment of the Lessor's Ground Lease, in accordance with the Purchase Option, of which lease payments are based on annual payments of $82 thousand, and are subject to a cumulative 10% escalation clause every 5 years through 2071.
On December 15, 2021, the Company entered into a 3 year lease agreement for the Boston, Massachusetts office that commenced in January 2022 and expires in January 2025.
On May 16, 2022, the Company entered into a 16 month lease agreement for the Zug, Switzerland office that commenced on September 1, 2022 and expires December 31, 2023.
As of September 30, 2022, future minimum commitments under the Company’s operating leases with lease terms in excess of 12 months were as follows (in thousands):
 Operating
Leases
2022 (remaining three months)$404 
20231,640 
20241,539 
20251,277 
20261,277 
Thereafter12,062 
Future minimum operating lease payments$18,199 
Less: Interest9,077 
Present value of lease liability$9,122 
Due to the Short-Term Amendment not exceeding twelve months, the Company has not recorded a right-of-use asset or corresponding lease liability for the amendment as of September 30, 2022. Future minimum remaining operating lease payments under this amendment are $40 thousand and $121 thousand for the years ending December 31, 2022 and 2023, respectively.
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Supplemental condensed consolidated balance sheet information related to leases is as follows:
 September 30, 2022December 31, 2021
Operating leases:  
Right-of-use assets$8,253 $7,228 
Current portion of lease liability1,547 1,041 
Lease liability7,575 6,983 
Total lease liability$9,122 $8,024 
Weighted average remaining lease term, in years12.614.4
Weighted average discount rate9.4 %9.5 %

The components of the Company's lease expense are as follows:
 Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Lease cost:
Operating lease expense$399 $339 $1,200 $836 
Variable lease expense48 65 168 183 
Total lease expense$447 $404 $1,368 $1,019 
Agreements with Contract Manufacturing Organizations and Contract Research Organizations
The Company enters into various agreements in the normal course of business with Contract Research Organizations ("CROs"), Contract Manufacturing Organizations ("CMOs") and other third parties for preclinical research studies, clinical trials and testing and manufacturing services. The agreements with CMOs relate to the manufacturing of sterile gel that is mixed with in-house produced vectors as part of the final drug product applied in certain of our clinical trials. These agreements may also include research and development activities, storage, packaging, labeling, and/or testing of our preclinical and clinical-stage products. The Company is obligated to make milestone payments under certain of these agreements. The estimated remaining commitment as of September 30, 2022 under these agreements is approximately $2.4 million. The Company may also be responsible for the payment of a monthly service fee for project management services for the duration of any agreements. The Company has incurred expenses under these agreements of $2.1 million and $5.1 million for each of the three and nine months ended September 30, 2022 and $744 thousand and $3.3 million for the three and nine months ended September 30, 2021.
Commercial Preparedness Activities
The Company has contracted with various third parties to facilitate, coordinate and perform agreed upon commercial preparedness and market research activities relating to our lead product candidate. These contracts typically call for the payment of fees for services upon the achievement of certain milestones. The estimated remaining commitment as of September 30, 2022 is $6.2 million. The Company has incurred expenses under these activities of $3.2 million and $9.5 million for the three and nine months ended September 30, 2022 and $1.8 million and $4.1 million for the three and nine months ended September 30, 2021.
ASTRA Contractual Obligations
The Company has contracted with various third parties to complete the interior build-out of our second cGMP facility, ASTRA. Additionally, the Company has entered into various non-cancellable purchase agreements for long-lead materials to help avoid potential schedule disruptions or material shortages. These contracts typically call for the payment of fees for services or materials upon the achievement of certain milestones. The estimated remaining commitment as of September 30, 2022 is $10.3 million. The Company has included costs incurred to-date associated with ASTRA within construction in progress as of September 30, 2022.
On June 30, 2021, the Company entered into a Standard Form of Contract for Construction and the corresponding General Conditions of the Contract for Construction (collectively, the “Agreement”) with The Whiting-Turner Contracting Company (“Whiting-Turner”), pursuant to which Whiting-Turner is constructing and managing the interior construction of
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ASTRA. Subject to certain conditions in the Agreement, the Company will pay Whiting-Turner a contract price consisting of the cost of work plus a fee equal to 1.75% of the cost of work.
Effective September 13, 2021, the Company entered into a guaranteed maximum price amendment (the "Amendment") to the Agreement to set forth the guaranteed maximum price, as well as the date by which Whiting-Turner is to achieve Substantial Completion (as defined in the Agreement). Under the Amendment, the guaranteed maximum price to be paid by the Company is $84.1 million, subject to certain additions and deductions by change orders as provided by the Agreement. Whiting-Turner’s work under the Agreement represents a portion of the work necessary to complete construction of the ASTRA facility and, therefore the date of Substantial Completion of Whiting-Turner’s work under the Agreement does not equate to the date of completion of ASTRA. The guaranteed maximum price under the Agreement with Whiting-Turner constitutes only a portion of the total estimated cost of building and equipping ASTRA as there are various other third parties engaged in the project for which contracts are not individually material.
Legal Proceedings
On May 1, 2020, a complaint was filed against the Company in the United States District Court for the Western District of Pennsylvania by PeriphaGen, Inc. ("PeriphaGen"), which also named our Chief Executive Officer and President, R&D, Krish Krishnan and Suma Krishnan, respectively. The complaint alleged breach of contract and misappropriation of trade secrets, which secrets the plaintiff asserted were used to develop our product candidates, including the vector backbones, and our STAR-D platform. The Company answered the complaint on June 26, 2020 by denying the allegations and brought a counterclaim asking the court to declare that the Company did not misappropriate PeriphaGen’s trade secrets or confidential information, and to further declare that the Company is the rightful and sole owner of our product candidates and STAR-D platform. In addition, the Company filed a third-party complaint against two principals of PeriphaGen, James Wechuck and David Krisky, alleging breach of contract and seeking contribution and indemnification from them in the event PeriphaGen is awarded damages.
On March 9, 2022, the court officially ordered the parties to attend mediation on March 11, 2022. During the course of the mediation process, the parties were able to exchange information, allowing the parties to value their positions. On March 12, 2022, the Company entered into a binding term sheet to settle the dispute. On April 27, 2022, the Company entered into a final settlement agreement and paid PeriphaGen an upfront payment of $25.0 million on April 28, 2022 for: (i) the release of all claims in the trade secret litigation with PeriphaGen; (ii) the acquisition of certain PeriphaGen assets, and (iii) the grant of a license by PeriphaGen for dermatological applications. Upon approval of the Company's first product by the U.S. Food and Drug Administration, the Company will pay PeriphaGen an additional $12.5 million, followed by three additional $12.5 million contingent milestone payments upon reaching $100.0 million in total cumulative sales, $200.0 million in total cumulative sales and $300.0 million in total cumulative sales. As defined in the settlement agreement, cumulative sales shall include all revenue from sales of the Company products by the Company and its affiliates and licensees, as reported by the Company in its annual Form 10-K filings. If all milestones are achieved, the total consideration for settling the dispute, acquiring certain assets, and granting of a license from PeriphaGen will be $75.0 million.
The Company recorded the $25.0 million under litigation settlement expense on the condensed consolidated statements of operations for the nine months ended September 30, 2022. The additional contingent milestone payments were not deemed probable due to uncertainty in the achievement of these milestones as of September 30, 2022, and therefore no additional accrual has been recorded.
The Company has received $0 and $768 thousand of insurance proceeds during the three and nine months ended September 30, 2022 and Company recorded an additional $372 thousand as a receivable within prepaid expenses and other current assets on the condensed consolidated balance sheet as management determined that the amount was probable of collection relating to legal defense costs and expenses associated with the PeriphaGen litigation. The reimbursements have been recorded as an offset to our legal fees included in general and administrative expenses on the condensed consolidated statements of operations and within operating activities on the condensed consolidated statements of cash flows.
7.    Capitalization
Sale of Common Stock
The Company sells shares of common stock from time to time pursuant to its previously executed sales agreement (the "Sales Agreement") with Cowen and Company, LLC ("Cowen") with respect to an at-the-market equity offering program ("ATM Program") finalized on December 31, 2020, under which Cowen acts as the Company's agent and/or principal and may issue and sell from time to time, during the term of the Sales Agreement, shares of common stock having an aggregate offering price up to $150.0 million ("Placement Shares"). The issuance and sale of the Placement Shares by the Company under the Sales Agreement are made pursuant to the Company's effective "shelf" registration statement on Form S-3. During 2021, the
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Company issued and sold 262,500 shares of common stock at a weighted average price of $66.50 per share for net proceeds of $16.9 million after deducting selling commissions of approximately $524 thousand. During the nine months ended September 30, 2022, the Company issued and sold 434,782 shares of common stock at a weighted average price of $69.00 per share for net proceeds of $29.1 million after deducting selling commissions of approximately $900 thousand, resulting in a remaining $102.5 million available for issuance under the ATM Program.
On December 3, 2021, the Company completed an underwritten public offering of 2,866,667 shares of its common stock, including 200,000 shares purchased by the underwriters pursuant to their option to purchase additional shares, at $75.00 per share. Net proceeds to the Company from the offering were $201.9 million after deducting underwriting discounts and commissions of approximately $12.9 million, and other offering expenses payable by the Company of $227 thousand.
On February 1, 2021, the Company completed an underwritten public offering of 2,211,538 shares of its common stock, including 288,461 shares purchased by the underwriters pursuant to their option to purchase additional shares, at $65.00 per share. Net proceeds to the Company from the offering were $134.9 million after deducting underwriting discounts and commissions of approximately $8.6 million, and other offering expenses payable by the Company of $198 thousand.
8.    Stock-Based Compensation
Stock Options
Options granted to employees and non-employees vest ratably over four-year periods and stock options granted to directors of the company vest ratably over one-year to four-year periods. Stock options have a life of ten years.
The Company granted 189,000 and 1,913,000 stock options to employees and directors of the Company during the three and nine months ended September 30, 2022, respectively, and 297,500 and 799,950 stock options to employees and directors of the Company during the three and nine months ended September 30, 2021, respectively.
The Company granted zero and 45,000 stock options to non-employees during the three and nine months ended September 30, 2022, respectively, and 50,000 stock options to non-employees during the three and nine months ended September 30, 2021, respectively.
The following table summarizes the Company’s stock option activity:
 Stock
Options
Outstanding
Weighted-
average
Exercise
Price
Weighted-
average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
(In thousands) (1)
Outstanding at December 31, 20212,043,179 $57.00 9.0$31,331 
Granted1,958,000 $63.03 
Exercised(84,776)$46.28 
Cancelled or forfeited(412,892)$58.90 
Expired(5,001)$78.19 
Outstanding at September 30, 20223,498,510 $60.38 8.8$37,213 
Exercisable at September 30, 2022637,315 $48.74 7.1$14,225 
(1)Aggregate intrinsic value represents the difference between the closing stock price of our common stock on September 30, 2022 and the exercise price of outstanding in-the-money options.
The total intrinsic value (the amount by which the fair market value exceeds the exercise price) of stock options exercised during the three and nine months ended September 30, 2022 was $1.3 million and $2.1 million, respectively, and during the three and nine months ended September 30, 2021 was $64 thousand and $872 thousand, respectively.
The weighted-average grant-date fair value per share of options granted to employees, non-employees, and directors during the three and nine months ended September 30, 2022 was $49.59 and $43.66, respectively, and during the three and nine months ended September 30, 2021 was $34.85 and $43.31, respectively.
There was $105.5 million of unrecognized stock-based compensation expense related to employees', non-employees', and directors’ option awards that is expected to be recognized over a weighted-average period of 3.1 years as of September 30, 2022.
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The Company has recorded aggregate stock-based compensation expense related to the issuance of stock option awards in the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 as follows (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Research and development$2,184 $673 $5,547 $2,273 
General and administrative6,433 2,502 16,791 6,742 
Total stock-based compensation$8,617 $3,175 $22,338 $9,015 
We capitalize the portion of stock-based compensation that relates to work performed on the construction of new buildings. There was $137 thousand and $423 thousand of stock-based compensation that was capitalized in the three and nine months ended September 30, 2022, respectively, and $79 thousand and $182 thousand of stock-based compensation that was capitalized in the three and nine months ended September 30, 2021, respectively.
The fair value of options was estimated at the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions for the three and nine months ended September 30, 2022 and 2021:
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Expected stock price volatility78 %73 %78 %73 %
Expected term of the award (years)6.236.106.216.18
Risk-free interest rate3.20 %1.13 %2.27 %1.05 %
Weighted average exercise price$70.91$53.69$63.03$67.15
Forfeiture rate % % % %
Restricted Stock Awards
Restricted stock awards ("RSAs") granted to employees vest ratably over a four-year period. The Company granted zero RSAs to employees of the Company during the three and nine months ended September 30, 2022, respectively, and zero and 98,800 RSAs to employees of the Company during the three and nine months ended September 30, 2021, respectively.
Number of SharesWeighted Average
Grant Date
Fair Value
Non-vested RSAs as of December 31, 202198,800 $78.89 
Granted $ 
Vested(14,321)$78.89 
Surrendered or forfeited(17,879)$78.89 
Non-vested RSAs as of September 30, 2022
66,600 $78.89 
There was $4.2 million of unrecognized stock-based compensation expense related to employees’ awards that is expected to be recognized over a weighted-average period of 2.4 years as of September 30, 2022.
The Company recorded stock-based compensation expense related to RSAs in the condensed consolidated statement of operations for the three and nine months ended September 30, 2022 and 2021 as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
General and administrative$441 $491 $1,340 $1,159 
Total stock-based compensation$441 $491 $1,340 $1,159 
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Shares remaining available for grant under the Company’s stock incentive plan were 607,366, with a sublimit for incentive stock options of 7,223, at September 30, 2022.
9.    Subsequent Events
The Company evaluates events or transactions that occur after the balance sheet date, but prior to the issuance of the financial statements, to identify matters that require disclosure. The Company concluded that no subsequent events have occurred that would require recognition or disclosure in the condensed consolidated financial statements.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on February 28, 2022.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms. These statements relate to future events or to our future operating or financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Some of such factors include, but are not limited to:
the initiation, timing, cost, progress and results, of our research and development activities, preclinical studies and clinical trials for B-VEC (previously “KB103” and now known as VyjuvekTM), KB105, KB104, KB407, KB408, KB301, KB303, and any other product candidates;
the continuing impact that the COVID-19 pandemic and measures implemented to prevent its spread may have on our business operations, access to capital, research and development activities, and preclinical and clinical trials for our product candidates;
the timing, scope or results of regulatory filings and approvals, including timing of final US Food and Drug Administration (“FDA”), marketing and other regulatory approval of our product candidates;
our ability to achieve certain accelerated or orphan drug designations from the FDA;
changes in our estimates regarding the potential market opportunity for B-VEC, KB105, KB104, KB407, KB408, KB301, KB303 and any other product candidates;
our ability to raise capital to fund our operations;
increased costs associated with our research and development programs for our product candidates;
our general and administrative expenses;