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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________________
FORM 10-Q
_____________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
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 No. 001-35890
_____________________________________________________________________
Millendo Therapeutics, Inc.
(Exact Name of Registrant as Specified in its Charter)
_____________________________________________________________________
Delaware
45-1472564
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
110 Miller Avenue, Suite 100
Ann Arbor, Michigan
48104
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (734) 845-9000
(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 Stock, $0.001 par valueMLNDThe Nasdaq Global 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, a 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 filer
Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an 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 Act).   Yes     No  
The number of shares of Registrant’s Common Stock, $0.001 par value per share, outstanding as of August 4, 2020 was 18,999,701.



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INDEX TO FORM 10-Q
Page

2

Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q to “Millendo,” “the Company,” “we,” “us,” and “our” refer to Millendo Therapeutics, Inc. and, where appropriate, its subsidiaries.
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, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect our plans, estimates and beliefs and include, but are not limited to, statements about our plans to develop and commercialize our product candidates; the potential and timing for a selective neurokinin 3 receptor antagonist (MLE-301) as a potential treatment of vasomotor symptoms to enter clinical trials; the impact of our discontinuation of the development of livoletide as a potential treatment of patients with Prader-Willi syndrome (“PWS”); the impact of ceasing the investment in the development of nevanimibe as a potential treatment for classic congenital adrenal hyperplasia (“CAH”); the timing of and our ability to obtain and maintain regulatory approvals for our product candidates; the impact of the COVID-19 pandemic on our business, preclinical studies and clinical development programs and timelines, our financial condition and results of operations; and our estimates regarding future revenue, if any, future expenses, the funding of our operations, including whether our existing cash, cash equivalents and restricted cash will be sufficient to fund our current operating plans into 2022, as well as our future capital requirements and needs for additional financing. These statements 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. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would,” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Because of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not transpire. These risks and uncertainties include, but are not limited to, the risks included in this Quarterly Report on Form 10-Q under Part II, Item 1A, “Risk Factors.”
Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this document. You should read this document with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.
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PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements
MILLENDO THERAPEUTICS, INC.
Consolidated Balance Sheets
(Unaudited)
(in thousands except share and per share amounts)

June 30,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents
$50,312  $62,478  
Short-term restricted cash705  1,034  
Prepaid expenses and other current assets2,845  6,344  
Refundable tax credit210  1,276  
Total current assets
54,072  71,132  
Operating lease right-of-use assets2,616  3,331  
Other assets444  507  
Total assets$57,132  $74,970  
Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt$207  $208  
Accounts payable1,340  1,495  
Accrued expenses7,366  9,066  
Operating lease liabilities — current1,173  1,751  
Total current liabilities10,086  12,520  
Debt, net of current portion168  168  
Operating lease liabilities1,934  2,395  
Other liabilities  16  
Total liabilities12,188  15,099  
Commitments and contingencies (Note 6)

Stockholders’ equity:
Preferred stock, $0.001 par value: 5,000,000 shares authorized; no shares issued and outstanding
    
Common stock, $0.001 par value: 100,000,000 shares authorized; 18,999,701 and 18,266,545 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
19  18  
Additional paid-in capital275,463  267,018  
Accumulated deficit(231,324) (208,654) 
Accumulated other comprehensive income118  165  
Total stockholders’ equity attributable to Millendo Therapeutics, Inc.44,276  58,547  
Equity attributable to noncontrolling interests668  1,324  
Total stockholders’ equity44,944  59,871  
Total liabilities and stockholders’ equity$57,132  $74,970  
See accompanying Notes to unaudited Interim Consolidated Financial Statements
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MILLENDO THERAPEUTICS, INC.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands except share and per share amounts)

Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Operating expenses:
Research and development
$6,466  $5,981  $14,006  $12,185  
General and administrative4,138  4,179  8,733  8,632  
Loss from operations
10,604  10,160  22,739  20,817  
Other expenses (income):
Interest income, net$(5) $(313) $(167) $(628) 
Other loss73  24  98  48  
Net loss$(10,672) $(9,871) $(22,670) $(20,237) 
Net loss per share of common stock, basic and diluted$(0.56) $(0.74) $(1.21) $(1.51) 
Weighted-average shares of common stock outstanding, basic and diluted18,999,223  13,379,842  18,723,865  13,368,981  
Other comprehensive income (loss):
Foreign currency translation adjustment$(5) $1  $(47) $(8) 
Comprehensive loss$(10,677) $(9,870) $(22,717) $(20,245) 
See accompanying Notes to unaudited Interim Consolidated Financial Statements
5

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MILLENDO THERAPEUTICS, INC.
Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands except share amounts)

Three Months Ended June 30, 2020
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders’
Equity (Deficit)
attributable to Millendo
Therapeutics, Inc.
Total Equity
Attributable to
Noncontrolling
Interests
Total
Stockholders’
Equity
(Deficit)
SharesAmount
Balance at April 1, 202018,998,252  $19  $274,340  $(220,652) $123  $53,830  $809  $54,639  
Exercise of stock options1,449  —  2  —  —  2  —  2  
Exercise/forfeiture of BSPCE warrants—  —  141  —  —  141  (141)   
Stock-based compensation expense—  —  980  —  —  980  —  980  
Foreign currency translation adjustment—  —  —  —  (5) (5) —  (5) 
Net loss—  —  —  (10,672) —  (10,672) —  (10,672) 
Balance at June 30, 202018,999,701  $19  $275,463  $(231,324) $118  $44,276  $668  $44,944  

Six Months Ended June 30, 2020
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders’
Equity (Deficit)
attributable to Millendo
Therapeutics, Inc.
Total Equity
Attributable to
Noncontrolling
Interests
Total
Stockholders’
Equity
(Deficit)
SharesAmount
Balance at January 1, 202018,266,545  $18  $267,018  $(208,654) $165  $58,547  $1,324  $59,871  
Issuance of common stock, net of issuance costs719,400  1  5,649  —  —  5,650  —  5,650  
Exercise of stock options
1,449  —  2  —  —  2  —  2  
Exercise/forfeiture of BSPCE warrants12,307  —  734  —  —  734  (656) 78  
Stock-based compensation expense—  —  2,060  —  —  2,060  —  2,060  
Foreign currency translation adjustment—  —  —  —  (47) (47) —  (47) 
Net loss—  —  —  (22,670) —  (22,670) —  (22,670) 
Balance at June 30, 202018,999,701  $19  $275,463  $(231,324) $118  $44,276  $668  $44,944  

See accompanying Notes to unaudited Interim Consolidated Financial Statements

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Table of Contents
MILLENDO THERAPEUTICS, INC.
Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands except share amounts)

Three Months Ended June 30, 2019
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders’
Equity (Deficit)
attributable to Millendo
Therapeutics, Inc.
Total Equity
Attributable to
Noncontrolling
Interests
Total
Stockholders’
Equity
(Deficit)
SharesAmount
Balance at April 1, 201913,357,999  $13  $235,815  $(174,452) $139  $61,515  $2,171  $63,686  
Exercise of stock options45,947  —  166  —  —  166  —  166  
Exercise of BSPCE warrants8,112  —  160  —  —  160  (112) 48  
Stock-based compensation expense—  —  995  —  —  995  —  995  
Foreign currency translation adjustment—  —  —  —  1  1  —  1  
Net loss—  —  —  (9,871) —  (9,871) —  (9,871) 
Balance at June 30, 201913,412,058  $13  $237,136  $(184,323) $140  $52,966  $2,059  $55,025  

Six Months Ended June 30, 2019
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders’
Equity (Deficit)
attributable to Millendo
Therapeutics, Inc.
Total Equity
Attributable to
Noncontrolling
Interests
Total
Stockholders’
Equity
(Deficit)
SharesAmount
Balance at January 1, 201913,357,999  $13  $234,876  $(164,086) $148  $70,951  $2,171  $73,122  
Exercise of stock options
45,947  —  166  —  —  166  —  166  
Exercise of BSPCE warrants8,112  —  160  —  —  160  (112) 48  
Stock-based compensation expense—  —  1,934  —  —  1,934  —  1,934  
Foreign currency translation adjustment—  —  —  —  (8) (8) —  (8) 
Net loss—  —  —  (20,237) —  (20,237) —  (20,237) 
Balance at June 30, 201913,412,058  $13  $237,136  $(184,323) $140  $52,966  $2,059  $55,025  

See accompanying Notes to unaudited Interim Consolidated Financial Statements
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MILLENDO THERAPEUTICS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

Six Months Ended
June 30,
20202019
Operating activities:
Net loss$(22,670) $(20,237) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
77  19  
Stock-based compensation expense2,060  1,934  
Amortization of right-of-use asset492  363  
Changes in operating assets and liabilities:
Prepaid expenses and other current assets4,499  (2,908) 
Other assets10  (59) 
Accounts payable(88) 1,056  
Accrued expenses and other liabilities(1,593) (892) 
Operating lease liabilities(817) (450) 
Cash used in operating activities(18,030) (21,174) 
Investing activities:
Purchase of property and equipment(26) (277) 
Proceeds from sale of marketable securities  4,385  
Cash (used in) provided by investing activities(26) 4,108  
Financing activities:
Repayment of debt  (90) 
Payment of financing costs(197) (162) 
Proceeds from the issuance of common stock, net of issuance costs5,650    
Proceeds from option and warrant exercises    
Proceeds from option and BSPCE warrant exercises78  214  
Repayment of principal on finance lease(18)   
Cash provided by (used in) financing activities5,513  (38) 
Effect of foreign currency exchange rate changes on cash48  (35) 
Net decrease in cash, cash equivalents and restricted cash(12,495) (17,139) 
Cash, cash equivalents and restricted cash at beginning of period63,512  73,770  
Cash, cash equivalents and restricted cash at end of period$51,017  $56,631  
Supplemental schedule of non-cash investing and financing activities:
Right-of-use assets acquired under operating leases$  $1,840  
Financing costs in accounts payable and accrued expenses$  $83  
See accompanying Notes to unaudited Interim Consolidated Financial Statements
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MILLENDO THERAPEUTICS, INC.
Notes to Unaudited Interim Consolidated Financial Statements
1. Organization and Description of Business
Description of Business
Millendo Therapeutics, Inc. (the “Company”), a Delaware corporation, together with its subsidiaries, is a clinical stage biopharmaceutical company primarily focused on developing novel treatments for endocrine diseases where current therapies do not exist or are insufficient. The Company seeks to leverage its understanding of recent biological discoveries in endocrinology to continue to advance and build its pipeline in order to improve the lives of patients.
The Company has a selective neurokinin 3-receptor (NK3R) antagonist (MLE-301) in its research and development pipeline, which it is developing as a potential treatment of vasomotor symptoms (“VMS”), commonly known as hot flashes and night sweats, in menopausal women. The Company is also actively pursuing additional pipeline assets in treatment areas where it has knowledge and experience in developing drug product candidates. The Company seeks to identify assets that complement its current portfolio.
The Company had been developing livoletide (AZP-531) as a potential treatment for Prader-Willi syndrome (“PWS”), a rare and complex genetic endocrine disease characterized by hyperphagia, or insatiable hunger. The Company discontinued the development of livoletide as a potential treatment for PWS in April 2020 based upon results from its Phase 2b trial. All costs, including estimated closeout costs associated with the livoletide program have been recognized as of June 30, 2020, resulting in the Company recording $3.1 million in the second quarter of 2020. The Company does not expect to incur future material expenses related to this program.
In an effort to streamline costs after discontinuing the PWS program, the Company eliminated employee positions representing approximately 30% of its prior headcount, which were completed in the second quarter of 2020. The Company recorded one-time costs of $1.1 million in the form of termination benefits related to this plan in the second quarter of 2020.
The Company had also been developing nevanimibe (ATR-101) as a potential treatment for patients with classic congenital adrenal hyperplasia, (“CAH”), a rare, monogenic adrenal disease that requires lifelong treatment with exogenous cortisol, often at high doses. The Company elected to cease investing in the development of nevanimibe as a potential treatment for CAH in June 2020 based on an interim review of data from its Phase 2b trial. All costs, including estimated closeout costs associated with the nevanimibe program for the treatment of CAH have been recognized as of June 30, 2020. The Company does not expect to incur future material expenses related to this program.
The Company’s operations to date have focused on conducting preclinical studies and clinical trials, acquiring technology and assets, organization and staffing, business planning, and raising capital. The Company does not have any products approved for sale and has not generated any revenue from product sales. The Company’s product candidate is subject to long development cycles and the Company may be unsuccessful in its efforts to develop, obtain regulatory approval for or market its product candidate.
The Company is subject to a number of risks including, but not limited to, the need to obtain adequate additional funding for the ongoing and planned clinical development of its current or future product candidates. Because of the numerous risks and uncertainties associated with pharmaceutical products and development, the Company is unable to accurately predict the timing or amount of funds required to complete development of its current or future product candidates, and costs could exceed the Company’s expectations for a number of reasons, including reasons beyond the Company’s control.
Liquidity
The Company has incurred net losses since inception and it expects to generate losses from operations for the foreseeable future primarily due to research and development costs for its potential product candidate. As of June 30, 2020, the Company had cash, cash equivalents and restricted cash of $51.0 million and an accumulated deficit of $231.3 million.
In December 2019, the Company sold a total of 4,791,667 shares of its common stock pursuant to an underwriting agreement (the “Underwriting Agreement”) with Citigroup Global Markets Inc. and SVB Leerink LLC, as representatives of the several underwriters named herein (the “Underwriters”), for total net proceeds of approximately $26.5 million, after deducting underwriting discounts and commissions and other offering expenses payable by the Company. The price to the public in this offering was $6.00 per share and resulted in the sale of 4,166,667 shares of the Company's common stock for net proceeds of
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approximately $23.0 million, after deducting underwriting discounts and commissions and other offering expenses payable by the Company. In addition, the Underwriters purchased an additional 625,000 shares of the Company's common stock at the public offering price of $6.00 per share pursuant to a purchase option granted to them under the Underwriting Agreement, resulting in net proceeds of approximately $3.5 million, after deducting underwriting discounts and commissions.
In April 2019, the Company entered into an “at-the-market” (“ATM”) equity distribution agreement with Citigroup Global Markets Inc. acting as sole agent with an aggregate offering value of up to $50.0 million, which allows the Company to sell its common stock through the facilities of the Nasdaq Capital Market. Subject to the terms of the ATM equity distribution agreement, the Company is able to determine, at its sole discretion, the timing and number of shares to be sold under this ATM facility. In March 2020, the Company amended and restated the equity distribution agreement to include SVB Leerink LLC as an additional sales agent for the ATM. In March 2020, the Company sold 719,400 shares of its common stock under its ATM equity distribution agreement for net proceeds of approximately $5.7 million.
The Company will require additional capital in the future through equity or debt financings, partnerships, collaborations, or other sources to carry out the Company’s planned development activities and to obtain regulatory approval for or to commercialize its product candidate. If additional capital is not secured when required, the Company may need to delay or curtail its operations until such funding is received. Various internal and external factors will affect whether and when the Company’s product candidate become an approved drug. The regulatory approval and market acceptance of the Company’s proposed future product (if any), length of time and cost of developing and commercializing the product candidate and/or failure of it at any stage of the drug approval process will materially affect the Company’s financial condition and future operations. The Company believes its cash, cash equivalents and restricted cash at June 30, 2020 are sufficient to fund its current operations for at least 12 months following the issuance of these financial statements.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of presentation and consolidation principles
The accompanying unaudited Interim Consolidated Financial Statements include the accounts of Millendo Therapeutics, Inc. and its subsidiaries, and all intercompany amounts have been eliminated. The unaudited Interim Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). The unaudited Interim Consolidated Financial Statements include the accounts of the Company’s subsidiaries in which the Company holds a controlling financial interest as of the financial statement date.
Unaudited Interim Consolidated Financial Statements
The Company has prepared the accompanying unaudited Interim Consolidated Financial Statements based on Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. These unaudited Interim Consolidated Financial Statements include, in the Company’s opinion, all adjustments, consisting only of normal recurring adjustments that the Company considers necessary for a fair presentation of its consolidated financial position and results of operations for these periods. The Company’s historical results are not necessarily indicative of the results to be expected in the future and the Company’s operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
The accompanying unaudited Interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on March 11, 2020. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies except as noted below:
Use of estimates
The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the Consolidated Financial Statements, actual results may materially vary from these estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.

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The Company anticipates that the COVID-19 pandemic will have an impact on clinical and preclinical development activities. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s financial statements.
Significant Risks and Uncertainties

With the global spread of the ongoing COVID-19 pandemic in 2020, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its business. The Company anticipates that the COVID-19 pandemic will continue to have an impact on clinical and preclinical development activities. The extent to which the COVID-19 pandemic impacts the Company’s business, its preclinical and clinical development and regulatory efforts, its corporate development objectives and the value of and market for its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its product candidates, loss of single source suppliers or failure to comply with manufacturing regulations, identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing its intellectual property rights; complying with applicable regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects its business and results of operations, the Company may also have the effect of heightening many of the other risks and uncertainties discussed above.

Net loss per share
Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as restricted stock and stock options, which would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share, the weighted-average number of shares of common stock remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive (amounts shown as common stock equivalents):

June 30,
20202019
Stock options
3,917,256  2,640,077  
Common stock warrants17,125  17,125  
BSA and BSPCE warrants48,265  148,607  
3,982,646  2,805,809  
Recent accounting pronouncements
In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). ASU 2020-01 states any equity security transitioning from the alternative method of accounting under Topic 321 to the equity method, or vice versa, due to an observable transaction will be remeasured immediately before the transition. In addition, the ASU clarifies the accounting for certain non-derivative forward contracts or purchased call options to acquire equity securities stating such instruments will be measured using the fair value principles of Topic 321 before settlement or exercise. The ASU is effective for fiscal years beginning after December 15,
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2020, and will be applied on a prospective basis. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intraperiod tax allocation, and calculating income taxes in an interim period. In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax), which is partially based on income, evaluating tax basis of goodwill recognized from a business combination, and reflecting the effect of any enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied either retrospectively or prospectively based upon the applicable amendments. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 resulted in certain modifications to fair value measurement disclosures, primarily related to level 3 fair value measurements. This standard was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, and early adoption was permitted. The adoption of this ASU did not have a material impact on the consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Additionally, ASU 2016-13 requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected through the use of an allowance of expected credit losses. In May 2019, the FASB issued ASU 2019-05, Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief, which amends ASU 2016-13 by providing entities with an option to irrevocably elect the fair value option to be applied on an instrument-by-instrument basis for eligible financial instruments that are within the scope of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which finalized effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses, leases, and hedging standards. Also, in November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which provides clarity about certain aspects of the amendments in ASU 2016-13. ASU 2016-13, as amended, is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and requires a modified retrospective approach. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements and related disclosures.
3. Fair Value Measurements
The following tables present the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis (in thousands):
June 30, 2020
(Level 1)
(Level 2)(Level 3)
Assets
Money market funds (included in cash and cash equivalents)$46,631  $  $  

December 31, 2019
(Level 1)(Level 2)(Level 3)
Assets
Money market funds (included in cash and cash equivalents)$59,382  $  $  

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4. Accrued Expenses
Accrued expenses consist of the following (amounts in thousands):
June 30,
2020
December 31,
2019
Compensation and related benefits$1,664  $2,042  
Professional fees1,454  2,929  
Preclinical and clinical costs3,208  1,820  
Insurance premiums475  1,423  
Other565  852  
Total$7,366  $9,066  

5. Debt
Bpifrance Reimbursable Advance
In December, 2017, in connection with its acquisition of Alizé Pharma SAS (“Alizé”), the Company assumed €0.7 million of debt that Alizé had outstanding with Bpifrance Financing (“Bpifrance”). The original advance amount of €0.8 million (“the Bpifrance Advance”) was provided to Alizé as an innovation aid that required Alizé to carry out certain activities related to its livoletide clinical development program and incur a certain level of program expenditures. No interest is charged or accrued under the advance.
The Company is required to make quarterly principal payments, which began in December 2016 and continue through September 2021. The quarterly principal payments escalate over the repayment period beginning with €17,500 per quarter and increasing to €50,000 through maturity. In addition to the quarterly payments, beginning January 1, 2016, Bpifrance may require the Company to pay, by no later than March 31 of each year, a reimbursement annuity equal to 20% of the proceeds generated by the Company from license, assignment or use of livoletide. Under no circumstance, however, would the Company be required to reimburse to Bpifrance principal amounts greater than the original advance it received.
The Company is permitted to repay the Bpifrance Advance at any time, at which point it would be released from all commitments and obligations under the Bpifrance Advance agreement. The Bpifrance Advance agreement does not contain any ongoing financial covenants.
During the three and six months ended June 30, 2020 the Company made no principal payments due to the fact that in April 2020, Bpifrance provided a six month deferral of principal payments to support businesses as a result of the COVID-19 pandemic. During the three and six months ended June 30, 2019, the Company made principal payments of $45,000 and $90,000, respectively. At June 30, 2020, the balance outstanding was $0.4 million (or €0.3 million).
6. Commitments and Contingencies
Operating Leases
The Company has noncancellable operating leases for office and laboratory space which have remaining lease terms between approximately three months and four years. In connection with privately-held Millendo Therapeutics, Inc.'s merger with OvaScience, Inc. in December 2018 (the “Merger”), the Company assumed a sublease agreement for office and laboratory space located in Waltham, Massachusetts. The sublease commenced on January 15, 2019 and expires in November 2020. The total minimum sublease rentals to be received under the Waltham, Massachusetts agreement is $0.6 million. The remaining sublease rentals to be received as of June 30, 2020 is $0.1 million. In February 2019 and October 2018, the Company entered into two additional noncancellable operating leases for office space in Ann Arbor, Michigan for the Company’s headquarters; one that the Company took possession of in April 2019, and the other that the Company took possession of in July 2019, respectively. One of its leases in Ann Arbor, Michigan expires in June 2024 and the other expires in March 2024. In April 2019, the Company entered into a lease agreement for office space in Lexington, Massachusetts. This lease was scheduled to expire on September 30, 2020; however, in June 2020 the Company exercised its right to terminate the lease early such that the lease will terminate on August 11, 2020. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants. In January 2020, the Company terminated its office lease agreement in Lyon, France.
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As of June 30, 2020, the operating lease ROU asset and the operating lease liabilities were $2.6 million and $3.1 million, respectively. The weighted average discount rate used to account for the Company's operating leases under ASC 842 is the Company’s estimated incremental borrowing rate of 7.0%. The Company has options to extend certain of its leases for another five to ten years. These options to extend were not recognized as part of the Company’s measurement of the ROU assets and operating lease liabilities for the three and six months ended June 30, 2020. The weighted average remaining term of the Company’s noncancellable operating leases is 3.42 years.
Rent expense related to the Company's operating leases was approximately $0.2 million and $0.1 million for the three months ended June 30, 2020 and 2019, respectively and approximately $0.5 million and $0.2 million for the six months ended June 30, 2020 and 2019, respectively. The Company recognizes rent expense on a straight-lined basis over the lease period and has accrued for rent expense incurred but not yet paid.
Cash paid for amounts included in the measurement of the lease liabilities was approximately $0.5 million and $1.0 million during the three and six months ended June 30, 2020, respectively. Cash paid for amounts included in the measurement of the lease liabilities was approximately $0.4 million and $0.5 million during the three and six months ended June 30, 2019, respectively. The Company received approximately $87,000 and $0.2 million in sublease payments related to its Waltham, Massachusetts lease during the three and six months ended June 30, 2020, respectively. The Company received approximately $85,000 and $0.2 million in sublease payments related to its Waltham, Massachusetts lease during the three and six months ended June 30, 2019, respectively.
Future minimum rental payments under the Company’s noncancellable operating leases at June 30, 2020 is as follows (amounts in thousands):

2020 (excluding the six months ended June 30, 2020)$825  
2021760  
2022783  
2023806  
2024302  
Thereafter
  
Total$3,476  
Present Value Adjustment(369) 
Lease liability at June 30, 2020$3,107  

Litigation

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

On November 9, 2016, a purported shareholder derivative action was filed in the Business Litigation Session of the Suffolk County Superior Court in the Commonwealth of Massachusetts (Cima v. Dipp, No. 16-3443-BLS1 (Mass. Sup. Ct.)) against certain former officers and directors of OvaScience and one current director of the Company (a former director of OvaScience) and OvaScience as a nominal defendant alleging breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets for purported actions related to OvaScience’s January 2015 follow-on public offering. On February 22, 2017, the court approved the parties’ joint stipulation to stay all proceedings in the action until further notice. Following a status conference in December 2017, the stay was lifted. On January 25, 2018, at the parties’ request, the court entered a second order staying all proceedings in the action until further order of the court. On March 2, 2020, the parties submitted a status report requesting that the court continue the stay. On March 5, 2020, the court entered an order continuing the stay and requiring that the parties file a further status report on or before June 30, 2020. On June 30, 2020, the parties filed a further status report requesting that the court continue the stay. The Company believes that the complaint is without merit and intends to defend against the litigation. There can be no assurance, however, that the Company will be successful. At present, the Company is unable to estimate potential losses, if any, related to the lawsuit.

On March 24, 2017, a purported shareholder class action lawsuit was filed in the U.S. District Court for the District of Massachusetts (Dahhan v. OvaScience, Inc., No. 1:17-cv-10511-IT (D. Mass.)) against OvaScience and certain former officers of OvaScience alleging violations of Sections 10(b) and 20(a) of the Exchange Act (the “Dahhan Action”). On July 5, 2017, the
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court entered an order approving the appointment of Freedman Family Investments LLC as lead plaintiff, the firm of Robins Geller Rudman & Dowd LLP as lead counsel and the Law Office of Alan L. Kovacs as local counsel. Plaintiff filed an amended complaint on August 25, 2017. The Company filed a motion to dismiss the amended complaint, which the court denied on July 31, 2018. On August 14, 2018, the Company answered the amended complaint. On December 9, 2019, the court granted leave for the lead plaintiff to file a second amended complaint under seal and permitted the defendants to file a motion to strike the second amended complaint. On December 30, 2019, the court granted the parties’ joint motion to stay all proceedings in the case pending mediation. On March 3, 2020, the parties conducted a mediation session. As the mediation was unsuccessful, the parties are resuming discovery, and the Company filed a motion to strike the second amended complaint on May 1, 2020. The Company believes that the amended complaint and the second amended complaint are without merit and intend to defend against the litigation. There can be no assurance, however, that the Company will be successful. A resolution of this lawsuit adverse to the Company or the other defendants could have a material effect on the Company's consolidated financial position and results of operations. At present, the Company is unable to estimate potential losses, if any, related to the lawsuit.
On July 27, 2017, a purported shareholder derivative complaint was filed in the U.S. District Court for the District of Massachusetts (Chiu v. Dipp, No. 1:17-cv-11382-IT (D. Mass.)) against OvaScience as a nominal defendant, certain former officers and directors of OvaScience and one current director of the Company (a former director of OvaScience) alleging breach of fiduciary duties, unjust enrichment and violations of Section 14(a) of the Exchange Act alleging that compensation awarded to the director defendants was excessive and seeking redress for purported actions related to OvaScience’s January 2015 follow-on public offering and other public statements concerning OvaScience's AUGMENT treatment. On September 26, 2017, the plaintiff filed an amended complaint which eliminated all claims regarding allegedly excessive director pay and additionally alleged claims of abuse of control and waste of corporate assets. On October 27, 2017, the defendants filed a motion to dismiss the amended complaint. The court heard oral argument on the motion to dismiss on April 5, 2018. On April 13, 2018, the court granted the defendants’ motion to dismiss the amended complaint for failure to state a claim for relief under Section 14(a). The court also dismissed the plaintiffs’ pendent state law claims without prejudice, based on lack of subject matter jurisdiction. On April 25, 2018, the plaintiffs moved for leave to amend the complaint and to stay this case pending the outcome of the Dahhan Action. The Company does not believe that the proposed amended complaint cures the defects in the current complaint, but informed plaintiffs’ counsel that, in the interest of judicial economy, defendants would not oppose the proposed amendment if the court would consider staying the case pending the resolution of the Dahhan Action. On April 27, 2018, the court granted the plaintiffs’ motion for leave to amend the complaint and for a stay. On April 30, 2018, the plaintiffs filed their second amended complaint. On May 23, 2018, the court entered an order staying this case pending the resolution of the Dahhan Action. the Company believes that the complaint is without merit and intend to defend against the litigation. There can be no assurance, however, that the Company will be successful. At present, the Company is unable to estimate potential losses, if any, related to the lawsuit.
In addition to the matters described above, the Company may be a party to litigation and subject to claims incident to the ordinary course of business from time to time. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, and diversion of management resources.
7. Stock-Based Compensation
On June 11, 2019, the Company held its 2019 Annual Meeting of Stockholders (the “Annual Meeting”). At the Annual Meeting, the Company’s stockholders approved the Company’s 2019 Equity Incentive Plan (the “2019 Plan”) and the Company’s 2019 Employee Stock Purchase Plan (the “2019 ESPP,” and together with the 2019 Plan, the “Plans”). The 2019 Plan is the successor to the Private Millendo 2012 Stock Plan and the OvaScience 2012 Stock Incentive Plan (each, as amended, the “Prior Plans”) and allows the Company to grant stock options, restricted stock unit awards and other awards at levels determined appropriate by the Company’s Board of Directors (the “Board”) or the Compensation Committee of the Board. No additional awards will be granted under either of the Prior Plans. The 2019 ESPP enables employees to purchase shares of the Company’s common stock through offerings of rights to purchase the Company’s common stock to all eligible employees. The Plans were adopted by the Board on April 29, 2019, subject to approval by the Company’s stockholders, and became effective with such stockholder approval on June 11, 2019. Outstanding awards under the Prior Plans continue to be subject to the terms and conditions of the Prior Plans.
The aggregate number of shares of the Company's common stock initially reserved for issuance under the 2019 Plan was 2,919,872 shares, which is the sum of (i) 534,320 shares, (ii) the number of unallocated shares remaining available for grant under the Prior Plans as of the effective date of the 2019 Plan, and (iii) the Prior Plans' Returning Shares (as defined below), as such shares become available from time to time. The number of shares of the Company's common stock reserved for issuance under the 2019 Plan will automatically increase on January 1 of each year, for a period of ten years, from January 1, 2020 continuing through January 1, 2029, by 4% of the total number of shares of the Company's common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Board.
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The term “Prior Plan's Returning Shares” refers to the following shares of the Company's common stock subject to any outstanding stock award granted under either of the Prior Plans: shares of common stock subject to awards that (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company; (iii) are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award. The foregoing includes shares subject to outstanding awards under the OvaScience 2011 Stock Incentive Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right.
The following shares of the Company's common stock under the 2019 Plan (collectively, the “2019 Plan Returning Shares”) will also become available again for issuance under the 2019 Plan: (i) any shares subject to a stock award that are not issued because such stock award expires or otherwise terminates without all of the shares covered by such stock award having been issued, (ii) any shares subject to a stock award that are not issued because such stock award is settled in cash; (iii) any shares issued pursuant to a stock award that are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares; and (iv) any shares reacquired by the Company in satisfaction of tax withholding obligations on a stock award or as consideration for the exercise or purchase price of a stock award.
The aggregate number of shares of the Company's common stock that may be issued under the 2019 ESPP is 133,580 shares, plus the number of shares of the Company's common stock that are automatically added on January 1st of each year, for a period of up to ten years, from January 1, 2020 continuing through January 1, 2029, by the lesser of (i) 1% of the total number of shares of the Company's capital stock outstanding on December 31 of the preceding calendar year, or (ii) 133,580 shares of the Company's common stock, unless a lesser number of shares is determined by the Board. Pursuant to the terms of the 2019 Employee Stock Purchase Plan, an additional 133,580 shares were added to the number of available shares effective January 1, 2020.
The Company measures employee and nonemployee stock-based awards at grant date fair value and records compensation expense on a straight-line basis over the vesting period of the award.
The Company recorded stock-based compensation expense in the following expense categories of its accompanying consolidated statements of operations and comprehensive loss for the three months ended June 30, 2020 and 2019 and six months ended June 30, 2020 and 2019, respectively (amounts in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Research and development
$173  $378  $473  $801  
General and administrative807  616  1,587  1,133  
Total
$980  $994  $2,060  $1,934  
Stock options
Options issued may have a contractual life of up to 10 years and may be exercisable in cash or as otherwise determined by the Board. Vesting generally occurs over a period of not greater than four years. In May 2020, the Company granted 840,450 stock options to its employees in connection with the PWS and CAH program changes that occurred during the second quarter of 2020 (see Note 1). The vesting is as follows: 1) 50 percent of the shares subject to this option grant will vest on the earlier of (i) December 31, 2020 or (ii) the Board's approval of the achievement of certain performance criteria; and 2) one twelfth (1/12th) of the remaining shares subject to this option grant will vest in equal monthly installments thereafter.
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The following table summarizes the activity related to stock option grants to employees and nonemployees for the six months ended June 30, 2020:
Shares
Weighted
average
exercise price
per share
Weighted-average
remaining
contractual
life (years)
Outstanding at December 31, 20192,498,606  $17.18  7.7
Granted1,823,625  4.77  
Exercised(1,449) 1.08  
Forfeited(403,526) 15.05  
Outstanding at June 30, 20203,917,256  $11.63  7.9
Vested and exercisable at June 30, 20201,403,163  $20.58  5.4
Vested and expected to vest at June 30, 20203,917,256  $11.63  7.9
As of June 30, 2020, the unrecognized compensation cost related to 2,514,093 unvested stock options expected to vest was $10.2 million. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of 2.7 years. The aggregate intrinsic value of options exercised during the three and six months ended June 30, 2020 was $1,000. The aggregate intrinsic value of options exercised during the three and six months ended June 30, 2019 was $0.5 million. The aggregate intrinsic value of both options outstanding and options exercisable as of June 30, 2020 was $0.1 million. The options granted during the three and six months ended June 30, 2020 had an estimated weighted-average grant date fair value of $1.37 and $3.18, respectively. The grant date fair value of each option grant was estimated during the three and six months ended June 30, 2020 and 2019 using the following assumptions within the Black-Scholes option-pricing model:
Three Months Ended
June 30, 2020
Three Months Ended
June 30, 2019
Six Months Ended
June 30, 2020
Six Months Ended
June 30, 2019
Expected term (in years)5.465.935.756.01
Expected volatility77 %79 %77 %80 %
Risk-free interest rate0.43 %1.91 %0.87 %2.35 %
Expected dividend yield0 %0 %0 %0 %
At the time of the Alizé acquisition, Alizé had 6,219 nonemployee (BSA) warrants and 5,360 employee (BSPCE) warrants outstanding, which have weighted-average exercise prices of €80.06 and €83.40, respectively. As of June 30, 2020, all BSA and BSPCE warrants were vested. During the three months ended June 30, 2020, no shares were exercised. During the six months ended June 30, 2020, 910 BSPCE warrants were exercised resulting in the issuance of 12,307 shares of the Company’s common stock. In addition, during the three and six months ended June 30, 2020, a total of 750 and 2,586 BSA and BSPCE warrants were forfeited. As of June 30, 2020, there were an aggregate of 48,265 shares of common stock issuable upon the exercise of the BSA and BSPCE warrants with a weighted-average exercise price of $7.16 per share. These instruments are included in the equity attributable to noncontrolling interests.
8. Subsequent Events
Subsequent events were evaluated through the filing date of this Quarterly Report on Form 10-Q.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited Interim Consolidated Financial Statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our annual audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission (“SEC”) on March 11, 2020. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, particularly in Item 1A. “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”
Overview
We are a clinical stage biopharmaceutical company primarily focused on developing novel treatments for endocrine diseases where current therapies do not exist or are insufficient. We seek to leverage our understanding of recent biological discoveries in endocrinology to continue to advance and build our pipeline in order to improve the lives of patients. We are currently developing MLE-301, a selective neurokinin 3-receptor (NK3R) antagonist, as a potential treatment of vasomotor symptoms (“VMS”) in menopausal women. We are also actively pursuing additional pipeline assets in treatment areas where we have knowledge and experience in developing drug product candidates. We seek to identify assets that complement our current portfolio.
VMS are commonly known as hot flashes and night sweats, in menopausal women. The sensations of heat and/or perspiration associated with VMS can occur frequently, generally lasting several minutes, and are often preceded or followed by sensations of cold and/or shivering. VMS interfere with the lives of affected women in a number of ways, including disrupting patients’ ability to sleep and concentrate and causing anxiety and depression. VMS are experienced by up to 70% of women as they advance through menopause. We believe that approximately 20 million women in the United States experience VMS at any given time and that these patients are motivated to seek medical treatment for relief. In June 2020, we filed an investigational new drug (“IND”), application to study MLE-301 for the treatment of VMS in menopausal women. We are preparing to initiate our first-in-human, Phase 1 clinical trial of MLE-301 in patients with VMS in the third quarter of 2020.
We had been developing livoletide (AZP-531) as a potential treatment for Prader-Willi syndrome (“PWS”), a rare and complex genetic endocrine disease characterized by hyperphagia, or insatiable hunger. As previously announced, we discontinued the development of livoletide as a potential treatment for PWS in April 2020, including the 9-month extension study and the initiation of the Phase 3 ZEPHYR trial. The decision to discontinue the PWS program was based on results from the Phase 2b ZEPHYR study, which showed that treatment with livoletide did not result in a statistically significant improvement in hyperphagia and food-related behaviors as measured by the Hyperphagia Questionnaire for Clinical Trials (HQ-CT) compared to placebo. We do not expect to incur future material expenses related to our livoletide program for the treatment of PWS.
In an effort to streamline costs after discontinuing our PWS program, we eliminated employee positions representing approximately 30% of our prior headcount, which were completed in the second quarter of 2020.
We had also been developing nevanimibe (ATR-101) as a potential treatment for patients with classic congenital adrenal hyperplasia (“CAH”), a rare, monogenic adrenal disease that requires lifelong treatment with exogenous cortisol, often at high doses. As we previously announced, we elected to cease investing in the development of nevanimibe as a potential treatment for CAH in June 2020. The decision to cease investment in the CAH program was based on the interim review of results from the Phase 2b clinical study and the changing competitive environment. Results from 10 subjects, nine from cohort 1 and one from cohort 2, with at least 12 weeks of treatment with nevanimibe in this open-label, continuous dose escalation study showed that one patient (10%) met the primary endpoint of achieving 17-hydroxyprogesterone (17-OHP) levels less than or equal to 2-times the upper limit of normal. Treatment under the amended protocol with dose titration starting at 500 mg BID improved tolerability of nevanimibe. We are currently exploring the option of out-licensing nevanimibe. We do not expect to incur future material expenses related to our nevanimibe program for the treatment of CAH.
In connection with the discontinuation of our livoletide program in PWS and the end of our investment in our nevanimibe program in CAH, we continue to evaluate our business strategy to prioritize and allocate resources towards the advancement of our current product candidate, MLE-301, and any potential future pipeline assets. As part of these efforts, we have engaged
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SVB Leerink to support our strategic review process, which is intended to result in an actionable plan that leverages our assets, capital and capabilities to maximize stockholder value.
Since inception, we have incurred significant operating losses and negative operating cash flows and there is no assurance that we will ever achieve or sustain profitability. Our net losses were $10.7 million and $9.9 million for the three months ended June 30, 2020 and 2019, respectively, and $22.7 million and $20.2 million for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, we had an accumulated deficit of $231.3 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future.
COVID-19 Business Update

With the global spread of the ongoing COVID-19 pandemic continuing in the second quarter of 2020, we are maintaining the cross-functional task force and business continuity plans we established and implemented in the first quarter of 2020, which are designed to address and mitigate the impact of the COVID-19 pandemic on our employees, operations and our business. While we are experiencing limited financial impacts from the pandemic at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, our business, financial condition, results of operations, growth prospects, preclinical studies and clinical development programs and timelines, including our planned Phase 1 clinical trial of MLE-301 in patients with VMS, could be materially adversely affected. We continue to closely monitor the COVID-19 situation as we evolve our business continuity plans and response strategy. In March 2020, our global workforce transitioned to working remotely. In June 2020, we began our initial plan to allow some employees to return to the office voluntarily, which was based on a phased approach that is principles-based, flexible and local in design, with a focus on employee safety and optimal work environment. Our current plans remain fluid as federal, state and local guidelines, rules and regulations continue to evolve.
Supply Chain
We are working closely with our third-party manufacturers, distributors and other partners to manage our supply chain activities and mitigate potential disruptions to our product supplies as a result of the COVID-19 pandemic. We currently expect to have adequate global supply of MLE-301 to support our ongoing preclinical studies and the Phase 1 clinical trial is expected to be initiated in the third quarter of 2020. If the COVID-19 pandemic persists for an extended period of time and begins to impact essential distribution systems such as FedEx and postal delivery, we could experience disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our products, which would adversely impact our ability to conduct clinical and preclinical trials.
Clinical Development
With respect to clinical development, we have taken measures to implement remote and virtual approaches, including remote patient monitoring and home delivery of drug treatments where possible, to maintain patient safety and trial continuity and to preserve study integrity. As the COVID-19 pandemic continues, we anticipate an impact on our ability to initiate trial sites, enroll and assess patients and maintain patient enrollment, including for our planned Phase 1 clinical trial of MLE-301 in patients with VMS. We could also see an impact on our ability to acquire supplies of study drug, report trial results or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise. In addition, we rely on contract research organizations or other third-parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic. If the COVID-19 pandemic continues and persists for an extended period of time, we could experience significant disruptions to our clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.
Regulatory Activities
We have not experienced, to date, any delays with respect to regulatory reviews or interactions with regulatory authorities as a result of the COVID-19 pandemic. Neither the U.S. Food and Drug Administration (the "FDA") or other regulatory authorities such as the European Medicines Agency (the "EMA"), has notified us of any COVID-19-related delays in reviews impacting our clinical or preclinical programs. However, it is possible that we could experience substantial delays in the timing of regulatory reviews or interactions with the FDA, EMA, or other regulatory authorities due to, for example, absenteeism by governmental employees or the diversion of regulators' efforts and attention to approval of other therapeutics or other activities related to COVID-19.
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Corporate Development
With our strong cash balance, we anticipate having sufficient liquidity to make strategic investments in our business this year in support of our long-term growth strategy. We believe that our cash, cash equivalents and restricted cash as of June 30, 2020 will fund our planned operations into 2022. However, our operating plan has recently changed due to discontinuations and revaluations of our clinical trial programs and may change further as a result of our ongoing strategic review or other factors currently unknown to us. We may need to seek additional funds sooner than planned, through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, as well as other coll