MMA loans

LOGICBIO THERAPEUTICS, INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes appearing elsewhere in this
Quarterly Report on Form 10-Q. Some of the information contained in this
discussion and analysis or set forth elsewhere in this Quarterly Report on Form
10-Q, including information with respect to our plans and strategy for our
business, includes forward-looking statements that involve risks and
uncertainties. As a result of many factors, including those factors set forth in
the "Risk Factors" section of this Quarterly Report on Form 10-Q, our actual
results could differ materially from the results described in, or implied by,
these forward-looking statements. Please also refer to the section under the
heading "Special Note Regarding Forward-Looking Statements and Industry Data."

Insight

We are a clinical-stage genetic medicine company pioneering genome editing and
gene delivery platforms to address rare and serious diseases from infancy
through adulthood. Our genome editing platform, GeneRide®, is a new approach to
precise gene insertion harnessing a cell's natural deoxyribonucleic acid, or
DNA, repair process potentially leading to durable therapeutic protein
expression levels. Our gene delivery platform, sAAVy™, is an AAV capsid
engineering platform designed to optimize gene delivery for treatments in a
broad range of indications and tissues. Our proprietary manufacturing process,
mAAVRxTM, is a novel process aimed at improving production yields for viral
vector manufacturing.

Our lead product candidate, LB-001, is a single-administration, genome editing
therapy developed using our GeneRide technology, currently in Phase 1/2
development for the treatment of MMA in pediatric patients. MMA is a rare and
life-threatening genetic disorder affecting approximately 1 in 50,000 newborns
in the United States that often results in developmental delays and other
long-term complications and a high rate of hospitalizations. In April 2021, we
granted CANbridge Care Pharma Hong Kong Limited, or CANbridge, an exclusive
option to obtain an exclusive license to develop and commercialize LB-001 for
the treatment of MMA in Greater China.

In December 2021, we announced the nomination of a new product candidate,
LB-401, based on our GeneRide technology. LB-401 is a genome editing therapy
being developed for the treatment of hereditary tyrosinemia type 1, or HT1. HT1
is a rare, genetic disorder characterized by elevated blood levels of the amino
acid tyrosine, a building block of most proteins, and affects more than 1,200
patients in North America and Europe alone.

Also based on our GeneRide technology, we completed the first phase of
preclinical development of our product candidate, LB-301, for the treatment of
Crigler-Najjar syndrome, or CN, a rare pediatric disease affecting approximately
1 in 1,000,000 newborns globally, in collaboration with Takeda Pharmaceutical
Company Limited, or Takeda. In addition, we are developing treatments based on
our GeneRide technology for two indications in collaboration with Daiichi Sankyo
Company, Limited, or Daiichi. We have also demonstrated proof of concept of our
GeneRide platform in hemophilia B and alpha-1-antitrypsin deficiency, or A1ATD,
and Wilson disease animal disease models.

Based on our sAAVy technology, we are developing gene therapy candidates
utilizing, among other things, sL65, the first capsid produced from sAAVy, for
the treatment of Fabry and Pompe diseases in collaboration with CANbridge. We
also granted CANbridge an option to obtain an exclusive worldwide license to
certain of our intellectual property rights, including those relating to sL65,
to develop and commercialize gene therapy candidates for the treatment of two
additional indications.

LB-001 for the treatment of methylmalonic acidemia (MMA) in pediatric patients

We are evaluating the safety, tolerability and preliminary efficacy of LB-001 in
our Phase 1/2 SUNRISE clinical trial in pediatric patients with MMA. The SUNRISE
trial is designed to enroll patients with ages ranging from six months to twelve
years and evaluate a single administration of LB-001 at two dose levels
(5e13 vg/kg and 1e14 vg/kg), with dose escalation subject to certain conditions.
The primary endpoint of the SUNRISE trial is to assess the safety and
tolerability of LB-001 at 52 weeks after a single infusion. Additional endpoints
include changes in disease-related biomarkers, including serum methylmalonic
acid, clinical outcomes such as growth and healthcare utilization, and the
pharmacodynamic marker albumin-2A.

In June 2021, we announced that the first patient was dosed in the SUNRISE
trial. In accordance with the FDA-reviewed protocol, we initially enrolled
patients in the three- to twelve-year-old age group at the lower dose. In
October 2021, we announced early results from the SUNRISE trial, which showed
measurable levels of albumin-2A, a technology-related biomarker indicating
site-specific gene insertion and protein expression. Detection of albumin-2A is
an indication that we have achieved the first ever in vivo genome editing in
children. Following an evaluation of the safety data from the first two patients
enrolled in the SUNRISE trial, we also announced in October 2021, that the
independent Data Safety Monitoring Board, or the DSMB, overseeing the SUNRISE

                                       23
--------------------------------------------------------------------------------

trial recommended continuation of the trial without modification.
Albumin-2A detection together with the DSMB continuation recommendation enabled
us to begin enrolling two patients in the higher dose cohort (with ages ranging
three to twelve years old), and two patients with ages ranging from six months
to two years old at the lower dose.

More recently, in mid-August 2022, we announced additional early results from
the SUNRISE trial from the first four pediatric patients treated with LB-001.
These results showed that albumin-2A, a technology-related biomarker, had been
detected in the serum of all four patients, which indicated site-specific
integration of the MMUT gene. Additionally, in two of the four patients, we saw
increasing levels of ALB-2A over time, which indicated selective advantage.

The disease-related biomarkers, including methylmalonic acid, methylcitric acid,
propionate oxidation and FGF-21, were variable, and had not shown a clear trend
to date.

As previously disclosed, the third and fourth patients dosed in the SUNRISE
trial, each of whom received 5e13 vg/kg of LB-001, experienced a drug-related
serious adverse event, or SAE, which was categorized as a case of thrombotic
microangiopathy, or TMA. Additionally, prior to the TMA event, the fourth
patient experienced a grade 1 drug-related SAE that was categorized as cytokine
release syndrome and necessitated an additional day in the hospital post-dosing.
Each TMA resolved within a few weeks, and these patients continue to be followed
in accordance with the SUNRISE protocol. Following the occurrence of the TMA
experienced by the third patient, we implemented a DSMB-endorsed response plan
that included increased patient monitoring.

Following the occurrence of the TMA experienced by the fourth patient, we
announced on February 2, 2022 that the FDA placed our Investigational New Drug
Application, or IND, for LB-001 on clinical hold. We announced on May 9, 2022
that the hold was lifted. In its communication lifting the hold, the FDA
indicated that all clinical hold issues had been addressed. In connection with
the lifting of the clinical hold, we amended the SUNRISE protocol. The amended
protocol includes enhanced monitoring measures such as frequent testing for
complement activation, a characteristic of TMA, as well as use of a complement
inhibitor in the event there are laboratory findings indicating a potential or
imminent TMA. We have initiated activities to resume dosing in the SUNRISE trial
and expect to dose the next patient in the third quarter of 2022.

In addition to the Phase 1/2 SUNRISE trial, we have also completed a
retrospective natural history study designed to evaluate disease progression in
pediatric patients with MMA. These data helped to provide us with a better
understanding of the natural progression of the disease, the impact of a liver
transplant on the outcomes of MMA patients and potential endpoints such as the
relevance of methylmalonic acid levels on clinical outcomes, with the goal of
informing our future clinical development in MMA and our discussions with
regulatory agencies as we look toward advancing our MMA program. We presented
preliminary findings from our retrospective natural history study at the
American College of Medical Genetics in April 2021.

In July 2019, the FDA granted rare pediatric disease designation for LB-001 for
the treatment of MMA, and in April 2019, the FDA granted orphan drug designation
for LB-001 for the treatment of MMA. In November 2020, the FDA granted fast
track designation for LB-001 for the treatment of MMA, and in June 2021, the
European Commission granted orphan drug designation to LB-001 for the treatment
of MMA.

LB-401 for the treatment of hereditary tyrosinemia type 1

In December 2021, we announced the nomination of a new development
candidate, LB-401, for the treatment of HT1. This development candidate is based
on our GeneRide platform. HT1 is a rare, genetic disorder characterized by
elevated blood levels of the amino acid tyrosine that affects more than 1,200
patients in North America and Europe alone. This condition is caused by a
shortage of the enzyme fumarylacetoacetate hydrolase, or FAH, one of the enzymes
required for the multi-step process that breaks down tyrosine.

In preclinical studies presented at the European Society of Gene and Cell
Therapy, or ESGCT, Annual Meeting in October 2021, the data in HT1 models with
acute liver damage showed that GeneRide-edited hepatocytes repopulated the
entire liver within four weeks post-administration, replacing the diseased
hepatocytes with corrected hepatocytes. HT1 mice that received the GeneRide-FAH
vector were no longer reliant on the current standard of care for the disease,
and demonstrated restored normal body growth, liver function, and undetectable
succinyl acetone levels. In preclinical studies to be presented at the ASGCT
Annual Meeting in May 2022, additional data in HT1 models with acute liver
damage highlighted the potential durability of LB-401 for at least 10 months.
Additionally, compared to the standard of care, these data demonstrated that HT1
mice treated with LB-401 showed succinylacetone reduction, better tyrosine
management, and a rapid decrease of alfa-fetoprotein, suggesting a lower risk of
hepatocellular carcinoma.


                                       24
--------------------------------------------------------------------------------

Other GeneRide Development Programs

Also based on our GeneRide technology, we completed the first phase of
preclinical development of our product candidate, LB-301, for the treatment of
CN, a rare pediatric disease affecting approximately 1 in 1,000,000 newborns
globally, in collaboration with Takeda. In initial proof-of-concept studies, a
murine GeneRide construct of LB-301 was used to correct the gene deficiency in
an animal model of CN. The introduction of UGT1A1 into the albumin locus in
mouse liver cells resulted in normalization of bilirubin levels and long-term
survival of mice deficient in UGT1A1 from less than twenty days to at least one
year. Our Takeda collaboration to further develop LB-301 in CN, resulted in the
extension of our proof-of-concept data and was reported at American Society of
Gene & Cell Therapy, or ASGCT, in May 2020. In these reported studies, neonatal
mice treated with a murine GeneRide construct of LB-301 resulted in a survival
benefit and a dose-dependent reduction in total circulating bilirubin. The
bilirubin levels achieved were within the range of that observed in patients
with Gilbert's syndrome (1-6mg/dL), a mild liver disorder usually requiring no
medical treatment. Moreover, through a collaboration with Dr. Andrés Muro at the
International Centre for Genetic Engineering and Biotechnology in Trieste,
Italy, we demonstrated that GeneRide treatment could improve motor
discoordination in preclinical mouse models of CN.

In addition, we are developing treatments based on our GeneRide technology for
two indications in collaboration with Daiichi. We have also demonstrated proof
of concept of our GeneRide platform in mouse models of hemophilia B and
alpha-1-antitrypsin deficiency, or A1ATD, and Wilson disease.

Our sAAVy platform

We are also developing sAAVy, a next generation AAV capsid platform, for use in
gene editing and gene therapy. At the ASGCT Annual Meeting in May 2020, we
presented data showing that the capsids delivered highly efficient functional
transduction of human hepatocytes in a humanized mouse model. Based on these
data, we believe the top-tier capsid candidates from this effort demonstrated
the potential to achieve significant improvements over benchmark AAVs that are
currently in clinical development. We are developing these highly potent vectors
for use in our internal development candidates and collaborations. We announced
data generated from translational animal models using these capsids at the ASGCT
2021 Annual Meeting in May 2021. In addition, in January 2021, we announced the
extension of our collaboration with Children's Medical Research Institute, or
CMRI, to continue to develop next-generation capsids for gene therapy and gene
editing applications in the liver as well as additional tissues.

Manufacturing

Our genome editing and gene therapy product candidates are manufactured as viral
vectors. Viral vector manufacturing is a complex process due to several factors,
including the following:

• the use of complex biological raw materials, including plasmid DNA, and cells

      banks, that need to comply with stringent regulatory requirements;


• the use of complex manufacturing methods, such as suspension transfection

culture of mammalian cells in large bioreactors (transfection is the process by

      which plasmid DNA enters the cells), and purification of intact viral
      particles;



  • the need to produce high-concentration, high purity drug product; and


• challenges associated with scaling, batch-to-batch consistency, and

product characterization, including measurement of potency and quality.

We have established extensive in-house non-GMP process development, analytical development, and vector development capabilities that are designed to optimize certain components of viral vector manufacturing, including:

• Improved production yields. A challenge facing gene editing and gene

candidate therapeutic products manufactured as viral vectors is the production

yield. Improvements in production yields have the potential to make drugs

product available for more patients in need by decreasing drug product

cost of goods. First results of our exclusive manufacturing process,

      mAAVRxTM, have demonstrated significantly improved production yields in
      comparison to published results.


• Improved drug product purity. Another challenge facing gene editing and

gene therapy product candidates manufactured as viral vectors is that, on

in recent years, the occurrence of undesirable side effects in

clinical trials have led industry stakeholders and regulatory authorities

authorities to seek higher levels of purity of the drug product for use in

humans. The proprietary methods developed by our internal team are designed

to increase the purity of the drug product.

                                       25
--------------------------------------------------------------------------------

• Reduction of “empty” capsids. A challenge facing the manufacture of AAV vectors in

in particular the formation of an excess of what is called “vacuum”

capsids, which are unable to provide therapeutic benefit and may

contribute to aggravate the side effects. Our in-house team has developed

      proprietary and scalable methods designed to decrease the proportion of
      empty capsids in our drug product.


• Reliable characterization methods. We have invested resources in the development

a wide range of methods to allow precise and consistent characterization

from our clinical supply of our flagship product, LB-001, which we can leverage to

use in our other development programs if and as we optimize the drug

of these programs for use in humans.

Operation overview

Since our inception in 2014, we have devoted the majority of our efforts to
research and development, including our preclinical and clinical development
activities and our manufacturing and process development activities, raising
capital, and providing general and administrative support for these operations.
We do not have any products approved for sale and our only revenue recognized to
date has been revenue related to upfront payments and research cost
reimbursement under our strategic agreements with CANbridge, Daiichi and Takeda.
Through June 30, 2022, we have raised approximately $126.0 million through
underwritten public offerings and at-the-market sales of our common stock and
$33.1 million in net proceeds from the sale of preferred stock prior to our
initial public offering. In July 2019, we entered into the Loan Agreement, under
which term loans in an aggregate principal amount of $20.0 million were made
available to us in two tranches, subject to certain terms and conditions. As of
June 30, 2022, we had drawn down the $10.0 million first tranche. In 2021, we
met the conditions to initiate drawdown of the $10.0 million second tranche but
did not exercise our right to do so and the option to draw down the second
tranche of the Term Loans expired.

We have incurred significant operating losses since our inception. Our ability
to generate product revenue sufficient to achieve profitability will depend on
the successful development and commercialization of our current product
candidates and any future product candidates. Our net loss was $11.7 million for
the six months ended June 30, 2022. As of June 30, 2022, we had an accumulated
deficit of $151.7 million. We expect to continue to incur significant expenses
and increasing operating losses for the foreseeable future in connection with
our ongoing activities. While we intend to continue to evaluate ways to enhance
our liquidity and capital position, our efforts will largely depend on future
developments that are highly uncertain and cannot be predicted with confidence
at this time.

Impact of COVID-19

The COVID-19 pandemic continues to present a substantial public health and
economic challenge around the world. We continue to closely monitor the COVID-19
pandemic in order to promote the safety of our personnel and to continue
advancing our research and development activities. We are following federal,
state and local requirements and guidelines with respect to the COVID-19
pandemic and have allowed our employees to work on-premises in accordance with
those requirements and guidelines.

The COVID-19 pandemic did not have a material impact on our results of
operations, cash flow and financial position as of and for the quarter ended
June 30, 2022. However, we are aware that certain of our third-party vendors are
being affected by import/export and other restrictions due to the COVID-19
pandemic, which may have an impact on certain of our research, development and
manufacturing activities. Further, the pandemic could also potentially affect
the business of the FDA, the EMA or other governmental authorities, which could
result in delays in meetings, reviews, inspections and approvals, including
those relating to LB-001. Any decision by the FDA, EMA or other governmental
authorities to delay meeting with us or scheduling inspections in light of
COVID-19 could have a material adverse effect on our clinical trials, which
could increase our operating expenses and have a material adverse effect on our
financial results, including the timing and amount of future regulatory
milestones we could receive from our partners.

We cannot predict the impact of the progression of the COVID-19 pandemic on
future results due to a variety of factors, including the health of our and our
third-party vendors, suppliers and collaborators' employees, our ability to
maintain operations, the ability of our third-party vendors, suppliers and
collaborators to continue operations, any further government and/or public
actions taken in response to the pandemic and ultimately the length of the
pandemic. We plan to continue to closely monitor the COVID-19 pandemic in order
to ensure the safety of our personnel and to continue advancing our research and
development activities.


                                       26
--------------------------------------------------------------------------------

Components of operating results

Revenue

Our only revenue recognized to date has been collaboration and service revenue
related to upfront payments and research cost reimbursement under our agreements
with CANbridge, Daiichi and Takeda. We have not generated any revenue from
product sales and do not expect to generate any revenue from product sales for
the foreseeable future.

Operating Expenses

Research and development costs

Research and development expenses consist primarily of costs incurred for our
research activities, including our discovery efforts and the development of our
product candidates and technologies, and include:

• salaries, benefits and other related costs, including

remuneration expense, for personnel engaged in research and development

functions;

• license maintenance costs and milestone costs incurred as part of

various license agreements;

• the cost of laboratory supplies and the acquisition, development and manufacture

preclinical study and clinical trial materials;

• expenses incurred under agreements with contract research organisations, or

CROs, contract manufacturing organizations or CMOs, as well as academics

institutions and consultants who conduct our preclinical and other studies

scientific development services;


    •  facility-related expenses, which include direct depreciation costs and
       allocated expenses for rent and maintenance of facilities and other
       operating costs;


    •  costs of outside consultants, including their fees, stock-based
       compensation and related travel expenses; and


  • costs related to compliance with regulatory requirements.



We expense research and development costs as incurred. Costs for external
development activities are recognized based on an evaluation of the progress to
completion of specific tasks. Payments for these activities are based on the
terms of the individual agreements, which may differ from the pattern of costs
incurred, and are reflected in our financial statements as prepaid or accrued
research and development expenses.

Research and development activities are central to our business model. We will
continue to incur significant expenses to conduct the clinical program for our
product candidate, LB-001, and as we continue to discover and develop additional
product candidates and technologies. If any of our product candidates enters
into later stages of clinical development, we expect that they will generally
have higher development costs than those in earlier stages of clinical
development, primarily due to the increased size and duration of later-stage
clinical trials.

General and administrative expenses

General and administrative expenses consist primarily of salaries, benefits and
other related costs, including stock-based compensation, for personnel in our
executive, finance, legal, human resources, corporate and business development
and administrative functions. General and administrative expenses also include
professional fees for legal, patent, accounting, auditing, tax and consulting
services, travel expenses, and facility-related expenses, which include direct
depreciation costs and allocated expenses for rent and maintenance of facilities
and other operating costs.

Other Income (Expense), Net

Interest income consists primarily of interest on our cash and cash equivalents
and investments. Interest expense consists of interest expense related to the
term loan under the Loan Agreement in July 2019. A portion of the interest
expense on the term loan is non-cash expense relating to the accretion of the
debt discount, amortization of issuance costs and accretion of the final payment
fee. During the three and six months ended June 30, 2022, we recorded $0.2
million and $0.4 million, respectively, in interest expense, of which $0.2
million and $0.3 million, respectively, related to cash interest paid and the
remainder to the accretion of the debt discount and amortization of issuance
costs. During the three and six months ended June 30, 2021, we recorded $0.3
million and $0.6 million, respectively, in interest expense, of which $0.2
million and $0.4 million, respectively, related to cash interest paid and the
remainder to the accretion of the debt discount and amortization of issuance
costs.

                                       27
--------------------------------------------------------------------------------

Operating results

Comparison of the three months ended June 30, 2022 and 2021

The following table summarizes our operating results for the three months ended June 30, 2022 and 2021:

                                      Three Months Ended
                                           June 30,
                                      2022          2021
                                        (in thousands)
REVENUE
Collaboration and service revenue   $   3,199     $     802
Total revenue                           3,199           802
OPERATING EXPENSES
Research and development                4,832         7,257
General and administrative              3,259         3,765
Total operating expenses                8,091        11,022
LOSS FROM OPERATIONS                   (4,892 )     (10,220 )
OTHER (EXPENSE) INCOME:
Other expense, net                       (152 )        (279 )
Net loss                            $  (5,044 )   $ (10,499 )




Revenue

Revenue for the quarter ended June 30, 2022 consisted of $3.2 million in
collaboration and service revenue related to our agreements with CANbridge and
Daiichi. Revenue for quarter ended June 30, 2021 consisted of $0.8 million in
collaboration and service revenue related to our agreements with CANbridge,
Daiichi, and Takeda. Although there may be fluctuations on a quarterly basis, we
expect our collaboration and service revenue to increase during the remaining
quarters of 2022 as we continue to conduct activities under the CANbridge and
Daiichi agreements.


Research and development costs

The following table summarizes our research and development expenses for the three months ended June 30, 2022 and 2021:

                                                    Three Months Ended
                                                         June 30,
                                                   2022             2021         (Decrease)/Increase
                                                                   (in thousands)
LB-001 external development and manufacturing
costs                                           $       628      $    1,835     $              (1,207 )
Personnel-related costs                               2,077           2,246                      (169 )
Lab supplies                                            598             678                       (80 )
Other research and development costs                  1,529           2,498                      (969 )

Total research and development expenditure $4,832 $7,257

     $              (2,425 )



Research and development expenses for the three months ended June 30, 2022 were
$4.8 million, compared to $7.3 million for the three months ended June 30, 2021.
The decrease of approximately $2.4 million was primarily due to a decrease of
$1.2 million related to the LB-001 external development and manufacturing costs
incurred during the three months ended June 30, 2021 to start up the Phase 1/2
SUNRISE clinical trial that did not reoccur during the three months ended June
30, 2022. In addition, there was a decrease of $1.0 million in other research
and development costs primarily related to one-time intellectual property costs
that occurred as a result of entering into the April 2021 collaboration
agreement with CANbridge during the three months ended June 30, 2021 that did
not re-occur during the three months ended June 30, 2022. Although there may be
fluctuations on a quarterly basis, we expect that our research and development
expenses will increase during the remaining quarters of 2022 as we continue to
advance the LB-001 clinical program as well as advance the remainder of our
pipeline both internally and with collaborators.

General and administrative expenses

General and administrative expenses were $3.3 million for the three months ended
June 30, 2022compared to $3.8 million for the three months ended June 30, 2021. The decrease of approximately $0.5 million was mainly attributable to a decrease of approximately

                                       28
--------------------------------------------------------------------------------


$0.5 million in professional service fees as we brought more professional work
in-house through key hires made during 2021. Although there may be fluctuations
on a quarterly basis, we expect that our general and administrative expenses
will remain relatively consistent during the remaining quarters of 2022.

Other expenses, net

Other expense, net was $0.2 million for the three months ended June 30, 2022,
compared to $0.3 million for the three months ended June 30, 2021. Other
expense, net decreased due to a lower principal amount due on the term loan
balance during the three-month period ended June 30, 2022. We expect our other
expense, net to decrease during the remaining quarters of 2022 as the principal
balance on our term loan decreases.



Comparison of the six months ended June 30, 2022 and 2021

The following table summarizes our operating results for the six months ended June 30, 2022 and 2021:

                                       Six Months Ended
                                           June 30,
                                      2022          2021
                                        (in thousands)
REVENUE
Collaboration and service revenue   $   6,015         1,263
Total revenue                           6,015         1,263
OPERATING EXPENSES
Research and development               10,473        13,676
General and administrative              6,883         7,824
Total operating expenses               17,356        21,500
LOSS FROM OPERATIONS                  (11,341 )     (20,237 )
OTHER (EXPENSE) INCOME:
Other expense, net                       (365 )        (544 )
Net loss                            $ (11,706 )   $ (20,781 )


Revenue

Our revenue for the six months ended June 30, 2022 consisted of $6.0 million in
revenue related to the Daiichi and CANbridge agreements. Our revenue for the six
months ended June 30, 2021 consisted of $1.3 million in revenue related to the
Takeda, Daiichi and CANbridge agreements The increase in revenue for the six
months ended June 30, 2022 compared to the corresponding period in 2021 was
related to an increase in revenue recognized under the April 2021 CANbridge and
Daiichi agreements and partially offset by winding down activities under the
January 2020 Takeda agreement.

Research and development costs

The following table summarizes our research and development expenditures for the six months ended June 30, 2022 and 2021:

                                                    Six Months Ended
                                                        June 30,
                                                   2022           2021         (Decrease)/Increase
                                                                  (in thousands)
LB-001 external development and manufacturing
costs                                           $    1,616     $    3,698                    (2,082 )
Personnel-related costs                              4,434          4,322                       112
Lab supplies                                         1,330          1,594                      (264 )
Other research and development costs                 3,093          4,062                      (969 )

Total research and development expenditure $10,473 $13,676

   $              (3,203 )



Research and development expenses for the six months ended June 30, 2022 were
$10.5 million, compared to $13.7 million for the six months ended June 30, 2021.
The decrease of approximately $3.2 million was primarily due to a decrease of
$2.1 million in LB-001 external development and manufacturing costs related to
clinical trial start-up expenses and clinical supply manufacturing expenses that
occurred during the six months ended June 30, 2021 that did not re-occur during
the six months ended June 30, 2022. In addition, there was a decrease of $1.0
million in other research and development costs primarily related to one-time
intellectual property costs that occurred as a result of entering the April 2021
collaboration agreement with CANbridge during the six months ended June 30, 2021
that did not re-occur during the six months ended June 30, 2022.

                                       29
--------------------------------------------------------------------------------

General and administrative expenses

General and administrative expenses were $6.9 million for the six months ended
June 30, 2022, compared to $7.8 million for the six months ended June 30, 2021.
The decrease of approximately $0.9 million was primarily driven by a decrease of
$1.1 million as we brought more professional work in-house through key hires
made during 2021. As such, personnel expenses increased approximately $0.5
million as we filled key open positions within the human resources, legal and
business development functions. Finally, there was a decrease of $0.3 million in
insurance and other general and administrative expenses.

Other expenses, net

Other expense, net was $0.4 million for the six months ended June 30, 2022
compared to other expense, net of $0.5 million for the six months ended June 30,
2021. Other expense, net decreased primarily due to a lower principal amount due
on the term loan balance during the six-month period ended June 30, 2022.

Cash and capital resources

Insight

Since our inception and through June 30, 2022, we have not generated any sales
revenue and have incurred significant losses and negative cash flows from our
operations.

As of June 30, 2022, we had cash and cash equivalents of $38.8 million, which we
believe will be sufficient to fund our operating expenses and capital
expenditure requirements into the second quarter of 2023. As such, and due to
the uncertainties described below, there is substantial doubt about the
Company's ability to continue as a going concern. On a quarterly basis, we are
required to conduct an accounting analysis under ASC 205-40, Disclosure of
Uncertainties about an Entity's Ability to Continue as a Going Concern, or ASC
205-40. The result of our ASC 205-40 analysis is that there is substantial doubt
about our ability to continue as a going concern through the next twelve months
from the date of issuance of these unaudited condensed consolidated financial
statements. We will require substantial additional capital to fund our research
and development, including our preclinical and clinical development activities
and our manufacturing and process development activities, and ongoing operating
expenses. Management's plans to mitigate the conditions that raise substantial
doubt include raising additional capital through equity or debt
financings, payments from our collaborators, strategic transactions, or a
combination of those approaches. These plans may also include the possible
elimination or deferral of certain operating expenses unless and until
additional capital is received. There can be no assurance that we will be
successful in raising additional capital or that such capital, if available,
will be on terms that are acceptable to us, or that we will be successful in
deferring certain operating expenses.



Cash flow

The following table summarizes our cash flows for the six months ended June 30,
2022 and 2021:

                                                         Six Months Ended
                                                             June 30,
                                                        2022          2021
                                                          (in thousands)
Net cash used in operating activities                 $ (12,920 )   $ (3,526 )
Net cash used in investing activities                       (47 )       (352 )
Net cash (used in) provided by financing activities      (1,667 )      1,911
Net decrease in cash, cash equivalents and
  restricted cash                                     $ (14,634 )   $ (1,967 )




Operating Activities

During the six months ended June 30, 2022, net cash used in operating activities
was $12.9 million, primarily related to our net loss adjusted for non-cash
charges and changes in the components of working capital. The $9.4 million
increase in net cash used in operating activities during the six months ended
June 30, 2022, as compared to the six months ended June 30, 2021, was primarily
driven by a $15.0 million decrease in deferred revenue, as revenue recognized
during the six-month period ended June 30, 2022 was previously paid by our
collaboration partners as well as a $3.2 million decrease in working capital
based on the timing of payments. These decreases in cash were partially offset
by a $9.1 million decrease in net loss during the six-month period ended June
30, 2022 as compared to the same period in 2021.

                                       30
--------------------------------------------------------------------------------

Investing activities

During the six months ended June 30, 2022, net cash used in investing activities
was $47,000 related to the purchases of property and equipment. During the six
months ended June 30, 2021, net cash used in investing activities was $0.4
million related to the purchases of property and equipment.

Fundraising activities

During the six months ended June 30, 2022, net cash used in financing activities
was $1.7 million, which was related to the repayment of principal on our term
loans. During the six months ended June 30, 2021 net cash provided by financing
activities was $1.9 million primarily related to net proceeds from sales of our
common stock under an Open Market Sale Agreement with Jefferies LLC as the sales
agent, or the Open Market Sale Agreement, $2.1 million, partially offset by the
repayment of principal on our term loans of $0.3 million.


Funding Requirements
We expect to continue to incur a significant amount of expenses in connection
with our ongoing activities for the foreseeable future. In particular, we will
incur significant expenses related to the preclinical activities and clinical
trials of our product candidates and any future product candidates.

We expect that we will continue to incur significant expenditures if and as we:

• continue our ongoing research programs and our preclinical development of

any product candidates from our current research programs;

• continue to conduct our clinical program for LB-001, including our Phase 1/2

SUNRISE clinical trial. As part of lifting LB-001

clinical arrest described above, we modified the SUNRISE protocol.

The implementation of the amendments to the protocol should increase the

      trial costs primarily due to increased screening time, an intensified
      monitoring regimen, prolonged hospitalization and potential acute use of a
      complement inhibitor;

• seek to identify, evaluate, acquire and/or develop additional research

      programs and additional product candidates, and initiate and conduct
      clinical trials for such product candidates;


   •  engage in transactions, including strategic, merger, collaboration,
      acquisition and licensing transactions;

• seek regulatory approvals for any successful product candidates

complete clinical trials; develop, optimize, scale and validate a

manufacturing processes and analytical methods for all product candidates we

can grow;

• obtain market acceptance of any product candidates we may develop as viable

      treatment options;


  • address competing technological and market developments;

• maintain, develop and protect our intellectual property portfolio and provide

reimbursement of third-party fees related to our patent portfolio;

• continue to develop our GeneRide and sAAVy technological platforms, as well as our

proprietary manufacturing process, mAAVRx;

• recruit scientific, clinical, technical, quality, regulatory,

general and administrative and commercial staff, plus operational staff,

financial and management information systems and personnel, including

personnel to support our process and analytical development, manufacturing

and planned future marketing efforts;

• make royalties, milestone payments or other payments under the current or future license

Agreements;


   •  establish and maintain supply chain and manufacturing relationships with
      third parties that can provide adequate products and services, in both
      amount, timing and quality, to support our development programs and the

market demand for any product candidate for which we obtain regulatory information and

marketing authorization;

• lease and construct new facilities, including offices and laboratories, as needed to

support any organizational growth;


   •  comply with good practice quality guidelines and regulations, or GXP,
      including good laboratory practice, good clinical practice, or GCP, or
      current good manufacturing practice, and cGMP;

• build and validate cGMP manufacturing at clinical and commercial scale

      capabilities;


                                       31
--------------------------------------------------------------------------------

• establish a sales, marketing and distribution infrastructure to

commercialize any product candidates for which we may obtain commercialization

      approval; and


  • experience any delays or encounter issues with any of the above.


We are unable to estimate the timing and amounts of increased capital outlays
and operating expenses associated with completing the research and development
of our product candidates because of the numerous risks and uncertainties
associated with the development of our lead product candidate, LB-001, and any
other product candidates and programs we may develop and because the extent to
which we may enter into collaborations with third parties for the development of
LB-001 and any other product candidates we may develop is unknown.



At June 30, 2022, we had $38.8 million of cash and cash equivalents on hand,
which we currently expect will be sufficient to fund our operating expenses and
capital expenditure requirements into the second quarter of 2023. We have based
these estimates on assumptions that may prove to be wrong, and we could use our
available capital resources sooner than we currently expect. Our future funding
requirements, both near and long-term, will depend on many factors, including:


• the scope, progress, schedule, costs and results of drug discovery,

preclinical development, laboratory testing and clinical trials for our

product candidates, including the ongoing development program for LB-001

(including Phase 1/2 SUNRISE clinical trial) and process development

and manufacturing activities for LB-001;

• the implementation of amendments to the Phase 1/2 clinical trial SUNRISE

protocol established as part of the lifting of the clinical blockage, which

include increased screening time, an intensified monitoring regimen,

prolonged hospitalization and potential acute use of a complement inhibitor;

• the outcome, timing and cost of follow-up advice and adherence to

regulatory requirements and decisions made by the FDA, EMA and others

regulatory authorities, including with respect to potential clinical suspensions

that may be imposed on us in the future;

• the impact of the COVID-19 pandemic on our ability to progress with our

research, development, manufacturing and regulatory efforts, including our

      ability to advance and complete our Phase 1/2 SUNRISE clinical trial of
      LB-001;

• the cost of filing, prosecuting, defending and enforcing our patent claims

and other intellectual property rights;

• the cost of defending potential intellectual property disputes, including

patent infringement actions;

• the achievement of significant milestones or the occurrence of other developments that

trigger payments under one of our current agreements or other agreements we

      may enter into;


   •  the extent to which we are obligated to reimburse, or entitled to

reimbursement of clinical trial costs and other research and development costs

      under future collaboration agreements, if any;


  • the effect of competing technological and market developments;

• the cost and schedule for completing the process and analytical development and

manufacturing activities;

• the extent to which we engage in transactions, including collaboration,

merger, acquisition and licensing transactions;

• our ability to establish and maintain collaborations under favorable conditions, if

at all;

• the cost of establishing sales, marketing and distribution capabilities for

      LB-001 and any other product candidates in regions where we choose to
      commercialize our product candidates, if approved;

• the launch, progress, timing and results of our commercialization of

LB-001 and any other product candidates, if approved, for commercial sale;

• our ability to repay outstanding debt; and

• our ability to attract, hire and retain qualified personnel.


A change in the outcome of any of the above variables that are applicable to the
development of a product candidate could mean a significant change in the costs
and timing associated with the research and development of that product
candidate. For example, if the FDA or another regulatory authority were to
require us to conduct clinical trials beyond those that we anticipate will be
required for the completion of clinical development of a product candidate, or
if we experience significant trial delays due to actions taken by regulatory
authorities, institutional review boards, or IRBs, patient enrollment or other
reasons, we would be required to expend significant additional financial
resources and/or time on the completion of clinical development. Any significant
delays in our

                                       32
--------------------------------------------------------------------------------


programs may also require us to reevaluate our corporate strategy, resulting in
the expenditure of significant resources and time. We may never succeed in
obtaining regulatory approval for our product candidates or any future product
candidates.

Until such time, if ever, that we can generate product revenue sufficient to
achieve profitability, we expect to finance our future cash needs through equity
or debt financings, payments from our collaborators, strategic transactions, or
a combination of those approaches. There is no assurance that we will be
successful in obtaining any additional financing on terms acceptable to the
Company, if at all. Additionally, the terms of any financing may adversely
affect the holdings or the rights of our stockholders. If we are unable to
obtain funding, we may be required to delay, reduce or eliminate some or all of
our research and development programs, preclinical and clinical development
programs or future commercialization efforts, or we may be unable to continue
operations.

Market sales of common stock

In November 2019, we entered into the Open Market Sale Agreement. Under the
terms of the Open Market Sale Agreement and the related prospectus supplement we
filed with the Securities and Exchange Commission, or the SEC, in November 2019,
we may sell shares of our common stock at the then current market prices, from
time to time, having an aggregate value of up to $50.0 million through Jefferies
LLC. We pay up to a 3% cash commission to Jefferies LLC on the proceeds from
sales under the program. During the six months ended June 30, 2022, we did not
sell any shares under the Open Market Sale Agreement and the related prospectus
supplement. During the six months ended June 30, 2021, we issued 260,242 shares
of our common stock at a weighted-average price of $8.46 per share, resulting in
net proceeds to us of $2.1 million. At June 30, 2022, we had $41.3 million in
aggregate gross offering amount of shares available under the Open Market Sale
Agreement and the related prospectus supplement. For information relating to the
rules known as the "baby shelf" rules, please see "-Raising additional capital
may cause dilution to our stockholders, restrict our operations or require us to
relinquish rights to our technologies or product candidates."

Policies and Material Judgments and Estimates

Our unaudited condensed consolidated financial statements are prepared in
accordance with generally accepted accounting principles in the United States,
or U.S. GAAP. The preparation of our unaudited condensed consolidated financial
statements and related disclosures requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, costs and expenses, and
the disclosure of contingent assets and liabilities in our unaudited condensed
consolidated financial statements. We base our estimates on historical
experience, known trends and events and various other factors that we believe
are reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. We evaluate our estimates and
assumptions on an ongoing basis. Our actual results may differ from these
estimates under different assumptions or conditions.

There have been no significant changes to our critical accounting policies from
those described in "Management's Discussion and Analysis of Financial Condition
and Results of Operations," included in our Annual Report on Form 10-K for the
year ended December 31, 2021, filed with the SEC on March 4, 2022, or our Form
10-K.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012 permits an "emerging growth
company" such as our company to take advantage of an extended transition period
to comply with new or revised accounting standards applicable to public
companies until those standards would otherwise apply to private companies. We
have irrevocably elected to "opt out" of this provision and, as a result, we
will comply with new or revised accounting standards when they are required to
be adopted by public companies that are not emerging growth companies.

Recently issued accounting pronouncements

See Note 2 of the Notes to our unaudited condensed consolidated financial statements elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

                                       33

————————————————– ——————————

© Edgar Online, source Previews