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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 September 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 November 3, 2020 was 18,999,701.



Table of Contents
INDEX TO FORM 10-Q
Page

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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 initiation, timing, progress and results of current and future clinical trials of MLE-301, a selective neurokinin 3 receptor (NK3R) antagonist, for the treatment of vasomotor symptoms (“VMS”) in menopausal women, including our Phase 1 clinical trial of MLE-301, 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.” A summary of selected risks associated with our business are set forth below.
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.
SUMMARY OF SELECTED RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to numerous risks and uncertainties, including those discussed at length in the section titled "Risk Factors." These risks include, among others, the following:

We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future and may never achieve or maintain profitability.
We have a limited operating history and have never generated any revenue from product sales, which may make it difficult to assess our future viability.
We will require additional capital to finance our operations, which may not be available on acceptable terms, if at all. Failure to obtain capital when needed may force us to delay, limit or terminate certain of our development programs, future commercialization efforts or other operations.
Raising additional capital by issuing equity or debt securities may cause dilution to our existing stockholders, and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights.
We may be required to make payments under licenses applicable to nevanimibe and MLE-301.
We may expend our limited resources to pursue a particular product candidate or disease and fail to capitalize on product candidates or diseases that may be more profitable or for which there is a greater likelihood of success.
Our future success is dependent on the successful clinical development, regulatory approval and subsequent commercialization of MLE-301 and any future product candidates. If we are not able to obtain the required regulatory approvals, we will not be able to commercialize our current or future product candidates and our ability to generate revenue will be adversely affected.
Preclinical studies or earlier clinical trials are not necessarily predictive of future results and the results of our clinical trials may not support our MLE-301 claims.
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Table of Contents
We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.
If we are not able to obtain required regulatory approvals, we will not be able to commercialize MLE-301 or any future product candidate and our ability to generate revenue will be harmed.
If we are unable to establish sales, marketing and distribution capabilities, either on our own or in collaboration with third-parties, we may not be successful in commercializing our product candidates, if approved.
Even if we obtain and maintain approval for our current and future product candidates from the FDA, we may nevertheless be unable to obtain approval for our product candidates outside of the United States, which would limit our market opportunities and could harm our business.
If we are not able to obtain orphan drug designations or exclusivity for any of our current or future product candidates for which we seek such designation, the potential profitability of any such product candidates could be limited.
We rely on the availability of licenses for intellectual property from third-parties and these licenses may not be available to us on commercially reasonable terms, or at all.
If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
We jointly own patents and patent applications with third-parties. Our ability to exploit or enforce these patent rights, or to prevent the third-party from granting licenses to others with respect to these patent rights, may be limited in some circumstances
We do not have our own manufacturing capabilities and will rely on third-parties to produce clinical and commercial supplies of MLE-301 and any future product candidates.
We rely on third-parties to conduct, supervise and monitor our clinical trials, and if those third-parties perform in an unsatisfactory manner, it may harm our business.
Our business, preclinical studies and clinical development programs and timelines, our financial condition and results of operations could be materially and adversely affected by the current COVID-19 pandemic.
We are highly dependent on the services of our key executives and personnel, including Julia C. Owens, Ph.D., our chief executive officer, Christophe Arbet-Engels, M.D., Ph.D., our chief medical officer, and Ryan Zeidan, Ph.D., our chief development officer, and if we are not able to retain these members of our management team or recruit and retain additional management, clinical and scientific personnel, our business will be harmed.
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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)

September 30,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents
$43,212 $62,478 
Short-term restricted cash540 1,034 
Prepaid expenses and other current assets2,093 6,344 
Refundable tax credit244 1,276 
Total current assets
46,089 71,132 
Operating lease right-of-use assets2,360 3,331 
Other assets389 507 
Total assets$48,838 $74,970 
Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt$222 $208 
Accounts payable1,733 1,495 
Accrued expenses4,267 9,066 
Operating lease liabilities — current899 1,751 
Total current liabilities7,121 12,520 
Debt, net of current portion117 168 
Operating lease liabilities1,786 2,395 
Other liabilities 16 
Total liabilities9,024 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 September 30, 2020 and December 31, 2019, respectively
19 18 
Additional paid-in capital276,551 267,018 
Accumulated deficit(237,698)(208,654)
Accumulated other comprehensive income274 165 
Total stockholders’ equity attributable to Millendo Therapeutics, Inc.39,146 58,547 
Equity attributable to noncontrolling interests668 1,324 
Total stockholders’ equity39,814 59,871 
Total liabilities and stockholders’ equity$48,838 $74,970 
See accompanying Notes to unaudited Interim Consolidated Financial Statements
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Table of Contents
MILLENDO THERAPEUTICS, INC.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands except share and per share amounts)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Operating expenses:
Research and development
$2,676 $7,308 $16,682 $19,493 
General and administrative3,380 4,443 12,113 13,075 
Loss from operations
6,056 11,751 28,795 32,568 
Other expenses (income):
Interest expense (income), net$8 $(238)$(159)$(866)
Other loss310 119 408 167 
Net loss$(6,374)$(11,632)$(29,044)$(31,869)
Net loss per share of common stock, basic and diluted$(0.34)$(0.87)$(1.54)$(2.38)
Weighted-average shares of common stock outstanding, basic and diluted18,999,701 13,420,614 18,816,481 13,386,381 
Other comprehensive income (loss):
Foreign currency translation adjustment$156 $(17)$109 $(25)
Comprehensive loss$(6,218)$(11,649)$(28,935)$(31,894)
See accompanying Notes to unaudited Interim Consolidated Financial Statements
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MILLENDO THERAPEUTICS, INC.
Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands except share amounts)

Three Months Ended September 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 July 1, 202018,999,701 $19 $275,463 $(231,324)$118 $44,276 $668 $44,944 
Stock-based compensation expense— — 1,088 — — 1,088 — 1,088 
Foreign currency translation adjustment— — — — 156 156 — 156 
Net loss— — — (6,374)— (6,374)— (6,374)
Balance at September 30, 202018,999,701 $19 $276,551 $(237,698)$274 $39,146 $668 $39,814 

Nine Months Ended September 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— — 3,148 — — 3,148 — 3,148 
Foreign currency translation adjustment— — — — 109 109 — 109 
Net loss— — — (29,044)— (29,044)— (29,044)
Balance at September 30, 202018,999,701 $19 $276,551 $(237,698)$274 $39,146 $668 $39,814 

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 September 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 July 1, 201913,412,058 $13 $237,136 $(184,323)$140 $52,966 $2,059 $55,025 
Exercise of stock options51,278 — 194 — — 194 — 194 
Exercise/forfeiture of BSPCE warrants9,601 — 367 — — 367 (304)63 
Stock-based compensation expense— — 1,196 — — 1,196 — 1,196 
Foreign currency translation adjustment— — — — (17)(17)— (17)
Net loss— — — (11,632)— (11,632)— (11,632)
Balance at September 30, 201913,472,937 $13 $238,893 $(195,955)$123 $43,074 $1,755 $44,829 

Nine Months Ended September 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
97,225 — 360 — — 360 — 360 
Exercise/forfeiture of BSPCE warrants17,713 — 527 — — 527 (416)111 
Stock-based compensation expense— — 3,130 — — 3,130 — 3,130 
Foreign currency translation adjustment— — — — (25)(25)— (25)
Net loss— — — (31,869)— (31,869)— (31,869)
Balance at September 30, 201913,472,937 $13 $238,893 $(195,955)$123 $43,074 $1,755 $44,829 

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

Nine Months Ended
September 30,
20202019
Operating activities:
Net loss$(29,044)$(31,869)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
115 52 
Stock-based compensation expense3,148 3,130 
Foreign currency remeasurement loss395  
Amortization of right-of-use asset748 719 
Loss on disposal of equipment6  
Changes in operating assets and liabilities:
Prepaid expenses and other current assets5,243 (505)
Other assets21 175 
Accounts payable280 812 
Accrued expenses and other liabilities(4,805)(1,204)
Operating lease liabilities(1,239)(841)
Cash used in operating activities(25,132)(29,531)
Investing activities:
Purchase of property and equipment(26)(364)
Proceeds from sale of marketable securities 4,385 
Cash (used in) provided by investing activities(26)4,021 
Financing activities:
Repayment of debt(53)(134)
Payment of financing costs(197)(245)
Proceeds from the issuance of common stock, net of issuance costs5,650  
Proceeds from option and BSPCE warrant exercises78 471 
Repayment of principal on finance lease(28)(9)
Cash provided by financing activities5,450 83 
Effect of foreign currency exchange rate changes on cash(52)5 
Net decrease in cash, cash equivalents and restricted cash(19,760)(25,422)
Cash, cash equivalents and restricted cash at beginning of period63,512 73,770 
Cash, cash equivalents and restricted cash at end of period$43,752 $48,348 
Supplemental schedule of non-cash investing and financing activities:
Right-of-use assets acquired under operating leases$ $3,414 
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 were recognized during the second quarter, which resulted in the Company recording $3.1 million in the second quarter of 2020. The Company recorded additional expense in the third quarter of 2020 related to the livoletide program, which reflects changes to estimated closeout costs. 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 were recognized during the second quarter of 2020. The Company recorded additional expense in the third quarter of 2020 related to the nevanimibe program, which reflects changes to estimated close out costs. 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 September 30, 2020, the Company had cash, cash equivalents and restricted cash of $43.8 million and an accumulated deficit of $237.7 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
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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 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 September 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 nine months ended September 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
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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.

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):

September 30,
20202019
Stock options
3,754,176 2,588,235 
Common stock warrants17,125 17,125 
BSA and BSPCE warrants48,265 126,699 
3,819,566 2,732,059 
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
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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, 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):
September 30, 2020
(Level 1)
(Level 2)(Level 3)
Assets
Money market funds (included in cash and cash equivalents)$37,635 $ $ 

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):
September 30,
2020
December 31,
2019
Compensation and related benefits$1,602 $2,042 
Professional fees1,198 2,929 
Preclinical and clinical costs1,002 1,820 
Insurance premiums119 1,423 
Other346 852 
Total$4,267 $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 nine months ended September 30, 2020 the Company made $53,000 in principal payments under the Bpifrance Advance agreement 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 third quarter the Company resumed normal principal payments under the Bpifrance Advance agreement. During the three and nine months ended September 30, 2019, the Company made principal payments of $44,000 and $134,000, respectively. At September 30, 2020, the balance outstanding was $0.3 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 two 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 September 30, 2020 is $58,000. 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 terminated 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 September 30, 2020, the operating lease ROU asset and the operating lease liabilities were $2.4 million and $2.7 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 nine months ended September 30, 2020. The weighted average remaining term of the Company’s noncancellable operating leases is 3.43 years.
Rent expense related to the Company's operating leases was approximately $0.2 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively and approximately $0.7 million and $0.4 million for the nine months ended September 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 $1.4 million during the three and nine months ended September 30, 2020, respectively. 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 nine months ended September 30, 2019, respectively. The Company received approximately $87,000 and $0.3 million in sublease payments related to its Waltham, Massachusetts lease during the three and nine months ended September 30, 2020, respectively. The Company received approximately $86,000 and $0.2 million in sublease payments related to its Waltham, Massachusetts lease during the three and nine months ended September 30, 2019, respectively.
Future minimum rental payments under the Company’s noncancellable operating leases at September 30, 2020 is as follows (amounts in thousands):

2020 (excluding the nine months ended September 30, 2020)$354 
2021760 
2022783 
2023806 
2024302 
Thereafter
 
Total$3,005 
Present Value Adjustment(320)
Lease liability at September 30, 2020$2,685 

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 court has scheduled a conference for January 7, 2021 to review the status of the case. 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
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of OvaScience alleging violations of Sections 10(b) and 20(a) of the Exchange Act (the “Dahhan Action”). On July 5, 2017, the 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. The mediation was unsuccessful. 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. The parties have agreed to participate in a second mediation session on November 10, 2020. 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
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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.
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 September 30, 2020 and 2019 and nine months ended September 30, 2020 and 2019, respectively (amounts in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Research and development
$258 $180 $731 $981 
General and administrative830 1,016 2,417 2,149 
Total
$1,088 $1,196 $3,148 $3,130 
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 nine months ended September 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
Granted1,824,375 4.77 
Exercised(1,449)1.08 
Forfeited(567,356)13.81 
Outstanding at September 30, 20203,754,176 $11.67 8.0
Vested and exercisable at September 30, 20201,358,519 $20.83 6.0
Vested and expected to vest at September 30, 20203,754,176 $11.67 8.0
As of September 30, 2020, the unrecognized compensation cost related to 2,395,657 unvested stock options expected to vest was $9.1 million. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of 2.5 years. There were no stock options exercised during the three months ended September 30, 2020. The aggregate intrinsic value of options exercised during the nine months ended September 30, 2020 was $1,000. The aggregate intrinsic value of options exercised during the three and nine months ended September 30, 2019 was $0.5 million. The aggregate intrinsic value of both options outstanding and options exercisable as of September 30, 2020 was $44,000. The options granted during the three and nine months ended September 30, 2020 had an estimated weighted-average grant date fair value of $1.12 and $3.18, respectively. The grant date fair value of each option grant was estimated during the three and nine months ended September 30, 2020 and 2019 using the following assumptions within the Black-Scholes option-pricing model:
Three Months Ended
September 30, 2020
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2020
Nine Months Ended
September 30, 2019
Expected term (in years)6.086.085.756.02
Expected volatility77%81%77%80%
Risk-free interest rate0.36%1.51%0.87%2.23%
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 September 30, 2020, all BSA and BSPCE warrants were vested. During the three months ended September 30, 2020, no shares were exercised. During the nine months ended September 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 months ended September 30, 2020, there were no BSA and BSPCE warrants forfeited and during the nine months ended September 30, 2020, a total of 2,586 BSA and BSPCE warrants were forfeited. As of September 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 $7.49 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 over 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 September 2020, we initiated our Phase 1 clinical trial of MLE-301. The first-in-human trial is designed to evaluate the safety and tolerability of MLE-301. The Phase 1 single ascending dose portion of the trial is being conducted in healthy male volunteers, to determine the pharmacokinetics of MLE-301 and its pharmacodynamic profile as measured by reductions of biomarkers (luteinizing hormone, testosterone). The Phase 1 multiple ascending dose portion will enroll post-menopausal women, with the goals of measuring reductions in VMS frequency and severity and establishing of initial clinical proof of concept. The Phase 1 clinical trial is supported by preclinical studies in which we observed potency and selectivity for the NK3R receptor, the potential for once-daily dosing, and testosterone lowering results consistent with the expected activity of an NK3R antagonist. We expect to initiate a Phase 2 clinical trial of MLE-301 in patients with VMS in 2021.
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.
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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 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 $6.4 million and $11.6 million for the three months ended September 30, 2020 and 2019, respectively, and $29.0 million and $31.9 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, we had an accumulated deficit of $237.7 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future.
COVID-19 Business Update

With the global impacts of the ongoing COVID-19 pandemic continuing in the third 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 ongoing Phase 1 clinical trial of MLE-301, 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. Throughout the third quarter of 2020, we continued our 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 our ongoing Phase 1 clinical trial, which we initiated in the third quarter of 2020. If the COVID-19 pandemic persists for an extended period of time and further impacts essential distribution systems such as express package 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 are prepared to take measures as needed 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, it is possible that there will be an impact on our ability to initiate trial sites, enroll and assess patients and maintain patient enrollment, including in the ongoing Phase 1 clinical trial of MLE-301. 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 significant 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,
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absenteeism by governmental employees or the diversion of regulators' efforts and attention to approval of other therapeutics or other activities related to COVID-19.
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 September 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 collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. In addition, the COVID-19 pandemic continues to evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our operations.
Other Financial and Corporate Impacts

Although we have experienced limited financial impacts from the pandemic at this time, we expect that the COVID-19 pandemic could adversely affect our business operations and financial results, our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our common stock, which 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 geographies, and the effectiveness of actions taken globally to contain and treat the disease. For example, if remote work policies for certain portions of our business, or that of our business partners, are extended longer than we currently expect, we may need to reassess our priorities and our corporate objectives for the year.
We have not experienced any material impact to our internal controls over financial reporting despite the fact that some of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness. In addition, all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks and exposures, the accessibility and distributed nature of our information technology systems, and the sensitive information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal and external attacks on our technology environment. Due to the COVID-19 pandemic, we have enabled all of our employees to work remotely, which may make us more vulnerable to cyberattacks or other incidents. To date, we have not experienced any increase in cyberattacks or other incidents.
Components of Our Results of Operations
Research and development expense
Research and development expense consists primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred. These expenses include:
personnel expenses, including salaries, benefits and stock-based compensation expense;
costs of funding research performed by third-parties, including pursuant to agreements with contract research organizations, (“CROs”), as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;
expenses incurred under agreements with contract manufacturing organizations (“CMOs”), including manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical study and clinical trial materials;
payments made under our third-party licensing agreements;
consultant fees and expenses associated with outsourced professional scientific development services;
expenses for regulatory activities, including filing fees paid to regulatory agencies; and
allocated expenses for facility costs, including rent, utilities, depreciation and maintenance.
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Milestone payment obligations incurred prior to regulatory approval of a product candidate, which are accrued when the event requiring payment of the milestone occurs are included in research and development expense.
We typically use our employee, consultant and infrastructure resources across our development programs. We track certain outsourced development costs by product candidate, but do not allocate all personnel costs or other internal costs to specific product candidates.
The following table summarizes our research and development expenses by product candidate, personnel expense and other expenses for the three and nine months ended September 30, 2020 and 2019, respectively:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
(dollars in thousands)
(dollars in thousands)
Livoletide expenses$83 $3,850 $8,053 $9,881 
Nevanimibe expenses145 867 882 2,595 
MLE-301 expenses1,312 838 2,739 1,282 
Personnel expenses1,006 1,529 4,515 5,054 
Other expenses130 224 493 681 
Total$2,676 $7,308 $16,682 $19,493 
Our research and development costs related to livoletide and nevanimibe have decreased significantly due to our decision to discontinue the livoletide program and our decision to cease investing in the development of nevanimibe based on results from the Phase 2b ZEPHYR study in PWS and the Phase 2b clinical study in CAH, respectively. All costs, including estimated program closeout costs associated with these programs, were recognized during the second quarter of 2020. Any revisions to estimated program closeout costs have been recognized as of September 30, 2020. Future expenses may be recorded as a result of changes to these estimated costs as closeout activities continue. We expect our research and develop costs related to MLE-301 to increase as we continue preclinical studies and clinical trials, including our ongoing Phase 1 clinical trial of MLE-301.
The successful development of our current product candidate or any future product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of MLE-301. We are also unable to predict when, if ever, material net cash inflows may commence from sales of MLE-301 or any future product candidates that we may develop due to the numerous risks and uncertainties associated with clinical development, including risks and uncertainties related to:
the ongoing COVID-19 pandemic, including the potential impact on various aspects and stages of the clinical development process;
the number of clinical sites included in the trials;
the length of time required to enroll suitable patients;
the number of patients that ultimately participate in the trials;
the number of doses patients receive;
the duration of patient follow-up and number of patient visits;
the results of our clinical trials;
the establishment of commercial manufacturing capabilities;
the receipt of marketing approvals; and
the commercialization of product candidates.
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We may never succeed in obtaining regulatory approval for MLE-301 or any future product candidates we may develop. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.
General and administrative expense
General and administrative expense consists primarily of personnel expenses, including salaries, benefits and stock-based compensation expense, for employees in executive, finance, accounting, business development, legal and human resource functions. General and administrative expense also includes corporate facility costs, including rent, utilities, depreciation and maintenance, not otherwise included in research and development expense, as well as legal fees related to intellectual property and corporate matters and fees for accounting, recruiting and consulting services.
Interest expense (income), net
Interest expense (income) represents amounts earned on our cash, cash equivalents and restricted cash balances.
Results of operations
Comparison of the three months ended September 30, 2020 and 2019
The following table summarizes our operating results for the periods indicated:
Three Months Ended
September 30,
20202019Change
(dollars in thousands)
Operating expenses:
Research and development$2,676 $7,308 $(4,632)(63.4)%
General and administrative3,380 4,443 (1,063)(23.9)
Loss from operations6,056 11,751 (5,695)(48.5)
Other expenses (income): 
Interest expense (income), net(238)246 (103.4)
Other loss310 119 191 160.5 
Net loss$(6,374)$(11,632)$5,258 (45.2)%

Research and development expense
Research and development expense decreased by $4.6 million to $2.7 million for the three months ended September 30, 2020 from $7.3 million for the three months ended September 30, 2019. The following table summarizes our research and development expenses for the three months ended September 30, 2020 and 2019:
Three Months Ended
September 30,
20202019Change
(dollars in thousands)
Preclinical and clinical development expense$1,540 $5,555 $(4,015)(72.3)%
Compensation expense, other than stock-based compensation748 1,349 (601)(44.6)
Stock-based compensation expense258 180 78 43.3 
Other expenses130 224 (94)(42.0)
Total research and development expense$2,676 $7,308 $(4,632)(63.4)%
The decrease in total research and development expense is attributable to:
a $4.0 million decrease in preclinical and clinical development expense primarily related to decreased spend due to discontinuing our development of the livoletide program and ceasing investment in the nevanimibe programs offset by increased spend on MLE-301;
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a $0.6 million decrease in compensation expense, other than stock-based compensation primarily due to the reduction in force completed in the second quarter of 2020, as a result of the discontinuance of our livoletide program; and
a $0.1 million increase in stock-based compensation expenses primarily related to additional options granted in 2020.
General and administrative expense
General and administrative expense decreased by $1.1 million to $3.4 million for the three months ended September 30, 2020 from $4.4 million for the three months ended September 30, 2019. The decrease was primarily due to lower professional fees and compensation expenses, including stock-based compensation. Professional fees decreased $0.8 million as a result of lower accounting fees and consulting fees incurred as compared to the prior period. The decrease in these fees was due to decreased expenditure on preparations for certain public reporting requirements in 2020 as compared to 2019, as well as lower consulting fees incurred related to assessing market opportunities for previous product candidates. Compensation and stock-based compensation decreased by $0.3 million as a result of a decrease in our general and administrative headcount and changes to compensation arrangements related to our reduction in force in the second quarter of 2020.
Interest expense (income), net
Interest expense (income), net decreased by $0.2 million to $8,000 interest expense, net for the three months ended September 30, 2020 from interest income, net of $0.2 million for the three months ended September 30, 2019. The change was primarily due to lower interest income received as a result of lower cash and cash equivalent and marketable securities balances and lower interest rates.
Other loss
Other loss increased by $0.2 million to $0.3 million for the three months ended September 30, 2020 from $0.1 million for the three months ended September 30, 2019 due to higher foreign currency losses as a result of exchange rate fluctuations on transactions denominated in a currency other than our functional currency.
Comparison of the nine months ended September 30, 2020 and 2019
The following table summarizes our operating results for the periods indicated:
Nine Months Ended
September 30,
20202019Change
(dollars in thousands)
Operating expenses:
Research and development$16,682 $19,493 $(2,811)(14.4)%
General and administrative12,113 13,075 (962)(7.4)
Loss from operations28,795 32,568 (3,773)(11.6)
Other expenses (income): 
Interest income, net(159)(866)707 (81.6)
Other loss408 167 241 144.3 
Net loss$(29,044)$(31,869)$2,825 (8.9)%

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Research and development expense
Research and development expense decreased by $2.8 million to $16.7 million for the nine months ended September 30, 2020 from $19.5 million for the nine months ended September 30, 2019. The following table summarizes our research and development expenses for the nine months ended September 30, 2020 and 2019:
Nine Months Ended
September 30,
20202019Change
(dollars in thousands)
Preclinical and clinical development expense$11,674 $13,758 $(2,084)(15.1)%
Compensation expense, other than stock-based compensation3,784 4,073 (289)(7.1)
Stock-based compensation expense731 981 (250)(25.5)
Other expenses493 681 (188)(27.6)
Total research and development expense$16,682 $19,493 $(2,811)(14.4)%
The decrease in total research and development expense is attributable to:
a $2.1 million decrease in preclinical and clinical development expense primarily related to decreased spend due to discontinuing our development of the livoletide and nevanimibe programs offset by increased spend on MLE-301;
a $0.3 million decrease in compensation expense, other than stock-based compensation primarily due to the reduction in force completed in the second quarter of 2020, as a result of the discontinuance of the livoletide program; and
a $0.3 million decrease in stock-based compensation expenses primarily related to the reduction in force completed in the second quarter of 2020.
General and administrative expense
General and administrative expense decreased by $1.0 million to $12.1 million for the nine months ended September 30, 2020 from $13.1 million for the nine months ended September 30, 2019. The decrease was primarily due to $2.0 million decrease in professional fees primarily as a result of lower legal and accounting fees incurred as compared to the prior period. The decrease in professional fees was due to decreased expenditure on preparations for certain public reporting requirements in 2020 as compared to 2019, as well as lower consulting fees incurred related to assessing market opportunities for previous product candidates. These decreases were partially offset by a $0.8 million increase in compensation and stock-based compensation expense primarily as a result of termination benefits paid in connection with our reduction in force in the second quarter of 2020 and additional options granted in 2020. In addition there was an increase of $0.2 million in other related expenses.
Interest income, net
Interest income, net decreased by $0.7 million to $0.2 million interest income, net for the nine months ended September 30, 2020 from interest income, net of $0.9 million for the nine months ended September 30, 2019. The change was primarily due to lower interest income received as a result of lower cash and cash equivalent and marketable securities balances and lower interest rates.
Other loss
Other loss increased by $0.2 million to $0.4 million for the nine months ended September 30, 2020 from $0.2 million for the nine months ended September 30, 2019 due to higher foreign currency losses as a result of exchange rate fluctuations on transactions denominated in a currency other than our functional currency.

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Liquidity and Capital Resources
Cash flows
The following table sets forth the primary uses of cash and cash equivalents for the nine months ended September 30, 2020 and 2019:
Nine Months Ended
September 30,
20202019
(in thousands)
Net cash used in operating activities$(25,132)$(29,531)
Net cash (used in) provided by investing activities(26)4,021 
Net cash provided by financing activities5,450 83 
Effect of foreign currency exchange rate changes on cash(52)
Net decrease in cash, cash equivalents and restricted cash$(19,760)$(25,422)
Operating activities
During the nine months ended September 30, 2020, we used $25.1 million of cash to fund operating activities. During the nine months ended September 30, 2020, cash used in operating activities reflected our net loss of $29.0 million offset by non-cash charges of $4.4 million, principally related to stock-based compensation, amortization of our right-of-use assets and the foreign currency remeasurement loss.
During the nine months ended September 30, 2019, we used $29.5 million of cash to fund operating activities. During the nine months ended September 30, 2019, cash used in operating activities reflected our net loss of $31.9 million and a net change in operating assets and liabilities of $1.6 million, offset by non-cash charges of $3.9 million, principally related to stock-based compensation and amortization of our right-of-use assets.
Investing activities
During the nine months ended September 30, 2020, we paid $26,000 in purchases of property and equipment. During the nine months ended September 30, 2019, we received $4.4 million in net proceeds from the sale of marketable securities and paid $0.4 million in purchases of property and equipment.
Financing activities
During the nine months ended September 30, 2020, we received proceeds of $5.7 million received from the issuance of common stock, net of issuance costs paid. See Note 1 of our Unaudited Interim Consolidated Financial Statements for additional information related to the issuance of common stock. These proceeds were offset by $0.2 million in the payment of financing costs. During the nine months ended September 30, 2019, we received proceeds of $0.5 million from the exercise of options and warrants, which were offset by $0.1 million for the repayment of debt, and $0.2 million in the payment of financing costs.
Funding requirements

We expect our expenses to decrease as a result of our discontinuing the development of livoletide and our ceasing investment in the development of nevanimibe as compared to previous operations. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development, the continuation of clinical trials and seek marketing approval for, our current or any future product candidates. Furthermore, we expect to continue to incur costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. The COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our operations.
In April 2019, we 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. Subject to the terms of the ATM equity distribution
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agreement, we are able to determine, at our sole discretion, the timing and number of shares to be sold under this ATM facility. In March 2020, we amended and restated the equity distribution agreement to include SVB Leerink LLC as an additional sales agent for the ATM. In March 2020, we sold 719,400 shares of common stock under our ATM equity distribution agreement for net proceeds of approximately $5.7 million.
As of September 30, 2020, we had cash, cash equivalents and restricted cash of $43.8 million, which we believe are sufficient to fund our planned operations into 2022. This cash runway guidance is based on our current operational plans and excludes any additional funding that may be received and business development activities that may be undertaken. In addition, our operating plans may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, third-party funding, and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches. In any event, we will require additional capital to pursue regulatory approval and the commercialization of our current and future product candidates.
Our future capital requirements will depend on many factors, including:
the scope, progress, results and costs of preclinical studies and clinical trials;
the scope, prioritization and number of our research and development programs;
the costs, timing and outcome of regulatory review of our product candidates;
our ability to establish and maintain collaborations on favorable terms, if at all;
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
the extent to which we acquire or in-license other product candidates and technologies;
the costs of securing manufacturing arrangements for commercial production; and
the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidates.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third-parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Contractual Obligations and Commitments
In January 2020, we terminated our office lease agreement in Lyon, France and in August 2020, we terminated our lease in Lexington, MA.
During the three and nine months ended September 30, 2020, there were no other material changes to our contractual obligations and commitments described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2020, as defined in Item 303(a)(4)(ii) of Regulation S-K.
Critical Accounting Policies and Estimates
Other than as described under Note 2 to our Unaudited Interim Consolidated Financial Statements, the Critical Accounting Policies included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 11, 2020, have not materially changed.
Item 3.  Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
Item 4.  Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, as of September 30, 2020. Based on the evaluation of our disclosure controls and procedures as of September 30, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and our Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes
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in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II
Item 1.  Legal Proceedings

Other than as described under Note 6 to our Unaudited Interim Consolidated Financial Statements, the Legal Proceedings included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 11, 2020, have not materially changed.
Item 1A.  Risk Factors
You should carefully consider the risks described below, as well as general economic and business risks and the other information in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2019. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment. We cannot assure you that any of the events discussed below will not occur. Such risks may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy.
Risks Related to Our Financial Position and Need for Additional Capital
We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future and may never achieve or maintain profitability.
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 loss was $27.2 million and $44.6 million for the years ended December 31, 2018 and 2019, respectively and $6.4 million and $29.0 million for the three and nine months ended September 30, 2020, respectively. As of September 30, 2020, we had an accumulated deficit of $237.7 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We have devoted substantially all of our efforts to the acquisition of and preclinical and clinical development of MLE-301, our current product candidate, nevanimibe, which we ceased our investment in the development of as a potential treatment of patients with CAH in June 2020, and livoletide, which we discontinued the development of as a potential treatment of patients with PWS in April 2020, as well as to building our management team and infrastructure. It could be several years, if ever, before we have a commercialized product and our commercialized products, if any, may not be profitable. The net losses we incur may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase significantly in connection with our ongoing activities such as:
continue our ongoing and planned development of MLE-301 for the treatment of vasomotor symptoms (“VMS”) in menopausal women, including our Phase 1 clinical trial of MLE-301;
initiating preclinical studies and clinical trials for any additional diseases for our current product candidates and any future product candidates that we may pursue;
building a portfolio of product candidates through acquisition or in-licensing;
developing, maintaining, expanding and protecting our intellectual property portfolio;
manufacturing, or having manufactured, clinical and commercial supplies of our product candidates;
seeking marketing approvals for our current and future product candidates that successfully complete clinical trials;
establishing a sales, marketing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval;
hiring additional administrative, clinical, regulatory and scientific personnel; and
continuing to incur additional costs associated with operating as a public company.
In order to become and remain profitable, we will need to develop and eventually commercialize, on our own or with collaborators, one or more product candidates with significant market potential. This will require us to be successful in a range
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of challenging activities, including completing clinical trials of MLE-301 and potential future product candidates, developing commercial scale manufacturing processes, obtaining marketing approval, manufacturing, marketing and selling any current and future product candidates for which we may obtain marketing approval, and satisfying any post-marketing requirements. We are only in the early stages of some of these activities, and may never succeed in any or all of these activities and, even if we do, we may never generate revenue from product sales or achieve profitability. For example, we discontinued our development of livoletide as a potential treatment for PWS in April 2020 based on topline results from the Phase 2b ZEPHYR trial which showed that treatment with livoletide did not result in a statistically significant improvement in hyperphagia and food-related behaviors as measured by the HQ-CT compared to placebo. In addition, we do not currently plan further investment in the development of nevanimibe for the treatment of CAH, based on the interim data review of the Phase 2b trial completed in June 2020.
Because of the numerous risks and uncertainties associated with pharmaceutical products and development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the U.S. Food and Drug Administration (the "FDA") or other regulatory authorities, such as the European Medicines Agency (the "EMA"), to amend existing studies or trials, to perform studies in addition to those currently expected, or if there are any delays in the development or in the completion of any planned or future preclinical studies or clinical trials of our current or future product candidates, our expenses could increase and profitability could be further delayed.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease our value and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in our value also could cause you to lose all or part of your investment.
We have a limited operating history and have never generated any revenue from product sales, which may make it difficult to assess our future viability.
We are a clinical stage biopharmaceutical company with a limited operating history. Our operations to date, with respect to the development of our product candidates, have been limited to organizing and staffing the business, business planning, raising capital, acquiring our product candidates and other assets and conducting preclinical and clinical development of our product candidates. We have not yet demonstrated an ability to successfully complete clinical development of a product candidate, obtain marketing approval, manufacture a commercial-scale drug (or arrange for a third-party to do so on our behalf), or conduct sales and marketing activities necessary for successful commercialization. Consequently, our predictions about our future success or viability may not be as accurate as they could be if we had more experience developing product candidates.
Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with any future collaborations, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize MLE-301 and any additional product candidates that we may pursue in the future. We do not anticipate generating revenue from product sales for the next several years, if ever. Our ability to generate revenue from product sales depends heavily on our or any future collaborators’ success in:
timely and successful completion of development activities of our current product candidates;
obtaining and maintaining regulatory and marketing approvals for MLE-301 and any future product candidates for which we successfully complete clinical trials;
launching and commercializing any product candidates for which we obtain regulatory and marketing approval by establishing a sales force, marketing and distribution infrastructure or, alternatively, collaborating with a commercialization partner;
qualifying for coverage and adequate reimbursement by government and third-party payors for our current or any future product candidates, if approved, both in the United States and internationally, and reaching acceptable agreements with such government and third-party payors on pricing terms;
developing, validating and maintaining a commercially viable, sustainable, scalable, reproducible and transferable manufacturing process for MLE-301 or any future product candidates that are compliant with current good manufacturing practices (“cGMP”);
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establishing and maintaining supply and manufacturing relationships with third-parties that can provide an adequate amount and quality of our product candidates and services to support our planned clinical development, as well as the market demand for MLE-301 and any future product candidates, if approved;
obtaining market acceptance, if and when approved, of MLE-301 or any future product candidates as a viable treatment option by physicians, patients, third-party payors and others in the medical community;
effectively addressing any competing technological and market developments;
implementing additional internal systems and infrastructure, as needed;
negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter, and performing our obligations pursuant to such arrangements;
maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how;
avoiding and defending against third-party interference or infringement claims; and
attracting, hiring and retaining qualified personnel.
We will require additional capital to finance our operations, which may not be available on acceptable terms, if at all. Failure to obtain capital when needed may force us to delay, limit or terminate certain of our development programs, future commercialization efforts or other operations.
We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct our Phase 1 clinical trial of MLE-301 and continue to develop, and if approved, commercialize MLE-301. Additionally, if we obtain marketing approval for our product candidates, we expect to incur significant expenses related to manufacturing, marketing, sales and distribution. Furthermore, we expect to continue to incur additional costs associated with operating as a public company.
As of September 30, 2020, our cash, cash equivalents and restricted cash were $43.8 million. Our existing cash, cash equivalents and restricted cash are currently expected to be sufficient to fund our current operating plans into 2022. This cash runway guidance is based on our current operational plans and excludes any additional funding that may be received and business development activities that may be undertaken. In addition, our operating plans may change as a result of many factors currently unknown to us, including the short- and long-term effects of the COVID-19 pandemic, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, third-party funding, and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches. In any event, we will require additional capital to pursue preclinical and clinical activities, regulatory approval and the commercialization of our current and future product candidates. Even if we believe we have sufficient capital for our current operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. If we elect to do so, additional capital may not be available to us on acceptable terms, if at all. Our ability to access additional capital, and as a result our operating results and liquidity needs, could be negatively affected by market fluctuations and economic downturn. The COVID-19 pandemic has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital, which could negatively affect our business. Any additional capital raising efforts may divert our management from its day-to-day activities, which may adversely affect our ability to develop and commercialize our current and future product candidates.
Raising additional capital by issuing equity or debt securities may cause dilution to our existing stockholders, and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights.
Until such time as we can generate substantial revenue from product sales, if ever, we expect to finance our cash needs through a combination of equity and debt financings, strategic alliances and license and development agreements in connection with any future collaborations. To the extent that we raise additional capital by issuing equity securities, our existing stockholders’ ownership may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Equity and debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming our shares, making investments, incurring additional debt, making capital expenditures or declaring dividends.
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The incurrence of indebtedness could result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants therein, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely affect our ability to conduct our business.
If we raise additional capital through collaborations, strategic alliances or third-party licensing arrangements, we may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional capital through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise develop and market ourselves.
We may be required to make payments under licenses applicable to nevanimibe and MLE-301.
We have certain milestone and royalty payments related to nevanimibe and MLE-301. We acquired worldwide, exclusive rights to nevanimibe pursuant to our license agreement with the Regents of the University of Michigan (the "University of Michigan"), entered into in June 2013 (the "UM License Agreement"). Under the terms of the UM License Agreement, we are obligated to make significant milestone and royalty payments in connection with the attainment of certain development steps and the sale of resulting products with respect to nevanimibe, as well as other material obligations. However, due to our decision to cease investing in the nevanimibe program, we do not expect to achieve the development and commercialization milestones that would trigger such payments.
We acquired worldwide, exclusive rights to MLE-301 pursuant to a license agreement with F. Hoffmann-La Roche Ltd and Hoffman-La Roche Inc. (collectively, "Roche," and such agreement, the "Roche License Agreement."). Under the terms of the Roche License Agreement, we are obligated to make significant milestone and royalty payments in connection with the attainment of certain development steps and the sale of resulting products with respect to MLE-301, as well as other material obligations. While we do not expect to incur significant milestone or other non-royalty obligations under the Roche License Agreement in the near term, if milestone or other non-royalty obligations become due, we may not have sufficient funds available to meet our obligations, which will materially adversely affect our business operations and financial condition.
We may expend our limited resources to pursue a particular product candidate or disease and fail to capitalize on product candidates or diseases that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on research programs and product candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with respect to our own product candidates for additional indications and other product candidates or diseases that later prove to have greater commercial potential. Our resource allocation decisions may ultimately not result in successful clinical development programs and may cause us to fail to capitalize on other viable product candidates, commercial products or profitable market opportunities. In addition, our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. For example, we discontinued the development of livoletide as a potential treatment of patients with PWS after receiving results from the Phase 2b trial in April 2020, and we do not currently plan further investment in the development of nevanimibe for the treatment of CAH based on the interim data review of the Phase 2b trial completed in June 2020.
Further, if we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through sale, collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights, which could materially adversely affect our business operations and financial condition.
Risks Related to Development and Commercialization
Our future success is dependent on the successful clinical development, regulatory approval and subsequent commercialization of MLE-301 and any future product candidates. If we are not able to obtain the required regulatory approvals, we will not be able to commercialize our current or future product candidates and our ability to generate revenue will be adversely affected.
We do not have any drugs that have received regulatory approval and may never be able to develop marketable product candidates. An inability to effectively commercialize our product candidates and to maximize their potential where possible through successful research and development activities, whether due to the impacts of the ongoing COVID-19 pandemic or otherwise, could have an adverse effect on our business, financial condition, results of operations and growth prospects.
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We expect that a substantial portion of our efforts and expenses for the foreseeable future will be devoted to the clinical development of MLE-301 and other future product candidates and, as a result, our business currently depends heavily on the successful development, regulatory approval and commercialization of MLE-301 and other future product candidates. We cannot be certain that MLE-301 or any other future product candidate will receive regulatory approval or be successfully commercialized even if we receive regulatory approval. The research, testing, manufacturing, safety, efficacy, labeling, approval, sale, marketing and distribution of our product candidates are, and will remain, subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and similar foreign regulatory authorities. Failure to obtain regulatory approval for MLE-301 or any other future product candidate in the United States or other jurisdictions will prevent us from commercializing and marketing MLE-301 or any other future product candidate.
Even if we were to successfully obtain approval from the FDA and comparable foreign regulatory authorities for our product candidates, any approval might contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements. If we are unable to obtain regulatory approval for our product candidates, or any approval contains significant limitations, on our own or with any future collaborators, we may not be able to obtain sufficient funding or generate sufficient revenue to continue the development of any other product candidate that we may in-license, develop or acquire in the future.
Furthermore, even if we obtain regulatory approval for MLE-301 or any other future product candidate, we will still need to develop a commercial infrastructure, or otherwise develop relationships with collaborators to commercialize, establish a commercially viable pricing structure and obtain approval for adequate reimbursement from third-party and government payors. If we, or our collaborators, are unable to successfully commercialize MLE-301 or any other future product candidate, we may not be able to generate sufficient revenue to continue our business.
Preclinical studies or earlier clinical trials are not necessarily predictive of future results and the results of our clinical trials may not support our MLE-301 claims.
We initiated a Phase 1 study of MLE-301 in September 2020, however MLE-301 will require further clinical testing before we are prepared to submit an NDA or other similar application for regulatory approval. We cannot predict with any certainty if or when we might apply for regulatory approval for MLE-301 for the treatment of VMS or whether any such application will be approved by the relevant regulatory authority. Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. For instance, the FDA or foreign regulatory authorities may not agree with our proposed endpoints for any clinical trials of MLE-301, even if validated in prior clinical trials of similar product candidates, which may delay the commencement of our future clinical trials. The FDA or foreign regulatory authorities may also not agree with our proposed trial designs or dosing regimens, which may likewise prevent or delay the commencement of our future clinical trials. The clinical trial process is also time-consuming. We estimate that clinical trials of MLE-301 for the treatment of VMS will take the next several years to complete.
Success in preclinical testing and early clinical trials does not ensure that later and/or pivotal clinical trials will generate the same results, or otherwise provide adequate data to demonstrate the safety and efficacy of a product candidate. Frequently, product candidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later or pivotal clinical trials. Failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials. For example, we expended substantial time and resources on a previous product candidate, MLE4901, an NK3R antagonist, which we ceased developing in 2017 due to concerns relating to elevated liver enzymes observed in clinical trials. Similarly, at least one of our competitors has publicly announced similar concerns in one of their clinical trials of an NK3R antagonists; however, they have indicated that they are continuing development of that product candidate with revised dosing for their Phase 3 trial. We are currently developing MLE-301, an NK3R antagonist, and there can be no assurance that we will not face similar development challenges with regard to this product candidate. We also discontinued our development of livoletide as a potential treatment of patients with PWS after receiving results from the Phase 2b trial in April 2020. In addition, we do not currently plan to make further investment in the development of nevanimibe for the treatment of CAH, based on the interim data review of the Phase 2b trial completed in June 2020. Further, we may encounter challenges in the clinical development of product candidates for reasons unrelated to the observed safety or efficacy of such product candidates in prior clinical trials. For example, in our Phase 2 clinical trial for the treatment of Cushing’s syndrome ("CS"), we experienced slower than anticipated enrollment, which could have made impractical further development of nevanimibe for the treatment of CS. As a result of the difficulty in enrolling this trial, we discontinued this Phase 2 clinical trial in August 2019 and discontinued development of nevanimibe for the treatment of CS. In addition, because we may at times pursue the treatment of multiple indications for a single product candidate, setbacks or failures in, or termination of, clinical development for one indication may have a negative impact on the clinical development for the treatment of other indications.
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Our approach to targeting endocrine diseases where current therapies do not exist or are insufficient, is novel and unproven, and as such, the cost and time needed to develop MLE-301 or any future product candidate is difficult to predict and our efforts may not be successful. If we do not observe favorable results in future or planned clinical trials of MLE-301, we may decide to delay or abandon development of MLE-301, which could harm our business, financial condition and results of operations. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials.
We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.
Before obtaining marketing approval from regulatory authorities for the sale of MLE-301 and any future product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidate for its intended indication. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:
direct and indirect effects of the ongoing COVID-19 pandemic on various aspects and stages of the clinical development process;
significant reprioritization and diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
failure to obtain regulatory approval to commence a trial;
unforeseen safety issues;
determination of dosing issues;
lack of effectiveness during clinical trials;
inability to reach agreement on acceptable terms with prospective contract research organizations (“CROs”), and clinical trial sites;
slower than expected rates of patient recruitment, failure to recruit adequate numbers of suitable patients to participate in our clinical trials or failure to maintain participation of recruited patients in clinical trials;
interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19 pandemic;
failure to manufacture sufficient quantities of a product candidate for use in clinical trials;
inability to monitor patients adequately during or after treatment; and
inability or unwillingness of medical investigators to follow our clinical protocols.
Further, we, the FDA, an institutional review board, or other regulatory authority may suspend our clinical trials at any time if it appears that we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, including, for example, the FDA’s good clinical practice (“GCP”), regulations, that we are exposing participants to unacceptable health risks, or if the FDA or other regulatory authority, as the case may be, finds deficiencies in our IND application or other submissions, or the manner in which the clinical trials are conducted. Therefore, we cannot predict with any certainty the schedule for commencement and completion of future clinical trials. If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our current and future product candidates could be harmed, and our ability to generate revenue from our current or future product candidates, once approved, may be delayed or eliminated. In addition, any delays in our clinical trials could increase our costs, slow down the approval process and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may harm our business, financial condition and results of operations. In addition, many of the factors that cause, or lead to, a delay in the
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commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
Moreover, principal investigators for our clinical trials may serve as our scientific advisors or consultants from time to time and receive compensation in connection with such services. We will be required to report these relationships to the FDA or other regulatory authorities as part of the drug approval process. The FDA or other regulatory authorities may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the trial results. They may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or other regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.
Due to the COVID-19 pandemic, we experienced a disruption in our ability to enroll and assess patients in our Phase 2b study of nevanimibe for the treatment of patients with CAH, which we discontinued after an interim data review from the Phase 2b study completed in June 2020. For our trials of MLE-301, including the recently initiated Phase 1 clinical trial of MLE-301, or future product candidates, we may in the future experience similar or other disruptions or delays in our ability to initiate trial sites, enroll and assess patients, maintain patient enrollment, acquire supplies of study drug, report trial results, or interact with regulators, ethics committees or other important agencies due to limitations in employee resources or otherwise. In addition, some patients may not be able to comply with clinical trial protocols if quarantines or shelter-in-place orders impede patient movement or interrupt healthcare services. Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations. In light of the ongoing COVID-19 pandemic, we have taken measures in past clinical trials to implement remote and virtual approaches to clinical development, including remote patient monitoring and home delivery of drug treatments where possible, and 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.
We have never obtained marketing approval for a product candidate and we may be unable to obtain, or may be delayed in obtaining, marketing approval for our current product candidates or any future product candidates that we may develop.
We have never obtained marketing approval for a product candidate. It is possible that the FDA may refuse to accept for substantive review any NDAs that we submit for our product candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our product candidates. If the FDA does not accept or approve our NDAs for any of our product candidates, it may require that we conduct additional clinical trials, preclinical studies or manufacturing validation studies and submit that data before it will reconsider our applications. Depending on the extent of these or any other FDA-required trials or studies, approval of any NDA or application that we submit may be delayed by several years or may require us to expend more resources than we have available. It is also possible that additional trials or studies, if performed and completed, may not be considered sufficient by the FDA to approve our NDAs.
Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializing our product candidates, generating revenues and achieving and sustaining profitability. If any of these outcomes occurs, we may be forced to abandon our development efforts for our product candidates, which could significantly harm our business, prospects, operating results and financial condition.
Enrollment and retention of patients in clinical trials is a competitive, expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control.
Identifying and qualifying patients to participate in our clinical trials is critical to our success. We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials. Patient enrollment and retention in clinical trials, including our ongoing clinical trial for MLE-301, depends on many factors, including: the size of the patient population, the nature of the trial protocol, our ability to recruit clinical trial investigators with the appropriate competencies and experience, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical trials of competing drugs for the same disease, the proximity of patients to clinical sites and the eligibility criteria for the trials, our ability to obtain and maintain patient consents and the risk that patients enrolled in clinical trials will drop out of the trials before completion.
Patient enrollment may also be affected by the ongoing COVID-19 pandemic due to the prioritization of hospitalization resources toward this pandemic, exposure of healthcare providers to COVID-19 and difficulties for patients to access clinical
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trial sites and comply with clinical trial protocols. For example, we initiated a Phase 1 study of MLE-301 in September 2020. While we have taken measures to implement remote and virtual approaches to clinical development in prior clinical trials, including remote patient monitoring and home delivery of drug treatments where possible, we cannot at this time fully forecast the scope of impacts that the COVID-19 pandemic may have on our ability to initiate trial sites, enroll and assess patients, acquire supplies of study drug and report trial results.

The competitive nature of clinical trials in the pharmaceutical and biotechnology industries may make it difficult for us to recruit a sufficient number of patients to complete any of our clinical trials or may increase costs. We may not be able to initiate or continue to support clinical trials of our product candidates for one or more indications, or any future product candidates, if we are unable to locate and enroll a sufficient number of eligible participants in these trials as required by the FDA or other regulatory authorities. For example, in our Phase 2 clinical trial for CS we experienced slower than anticipated enrollment, which could have made impractical further development of nevanimibe for the treatment of CS. As a result of the difficulty in enrolling this trial, we elected to discontinue this Phase 2 clinical trial in August 2019 and discontinued development of nevanimibe for the treatment of CS. Even if we are able to enroll a sufficient number of patients in our clinical trials, if the pace of enrollment is slower than we expect, the development costs for our product candidates may increase and the completion of our trials may be delayed or our trials could become too expensive or impractical to complete.

Furthermore, any negative results we may report in clinical trials of our product candidates may make it difficult or impossible to recruit and retain patients in other clinical trials of those product candidates. Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop MLE-301 or any other product candidate or could render further development impossible. For example, before we ceased investment in the nevanimibe program, we paused enrollment in the Phase 2b trial of nevanimibe for patients with CAH as a result of the COVID-19 pandemic. In addition, we may rely on CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we have and would in the future intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following any potential marketing approval.
During the conduct of clinical trials, clinical investigators monitor changes in patients’ health, including illnesses, injuries and discomforts. Often, it is not possible to determine whether or not the product candidate being investigated caused these conditions, and regulatory authorities may draw different conclusions or require additional testing to confirm these determinations if they occur. In addition, it is possible that as we test MLE-301 or any other product candidate in larger, longer and more extensive clinical programs, or as use of any current or future product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be observed or reported by subjects. If clinical testing indicates that MLE-301 or any future product candidate has side effects or causes serious or life-threatening side effects, we may need to change the design of ongoing clinical trials or adjust dosing levels in ongoing or future clinical trials, and the development of the product candidate may be delayed or terminated entirely. Further, if the product candidate has received regulatory approval, such approval may be revoked, which would materially harm our business, prospects, operating results and financial condition.
Moreover, if we elect or are required to modify, delay, suspend or terminate any clinical trial for our product candidates, the commercial prospects of our product candidates may be harmed and our ability to generate revenue through their sale may be delayed or eliminated. Any of these occurrences may harm our business, financial condition and prospects significantly.
We face substantial competition, and our operating results will suffer if we fail to compete effectively.
The commercialization of new drugs is competitive, and we may face worldwide competition from major pharmaceutical companies, specialty pharmaceutical companies, biotechnology companies and ultimately generic companies. Our competitors may develop or market therapies that are more effective, safer or less costly than any that we are commercializing, or may obtain regulatory or reimbursement approval for their therapies more rapidly than we may obtain approval for ours.
We are aware of a number of other clinical stage companies that are working to develop drugs that would compete, directly or indirectly, against MLE-301 for the treatment of VMS.
Astellas is developing fezolinetant and is conducting their Phase 3 VMS program. Bayer Pharmaceuticals recently purchased KaNDy Therapeutics and with it the dual NK1/3 receptor antagonist, NT-814. Bayer has announced that Phase 3 clinical trials
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of NT-814 will begin in 2021. Sojournix is currently studying SJX-653 in a Phase 2 trial. Additionally, Acer Therapeutics has announced their intentions to develop osanetant, an NK3R antagonist, for induced vasomotor symptoms stemming from hormonal therapies used to treat breast and prostate cancer, but have not announced definite plans for developing this product candidate for menopausal vasomotor symptoms.
Many of our existing or potential competitors may have substantially greater financial, technical and human resources than we do, and significantly greater experience in the discovery and development of product candidates, including in the recruitment of patients for clinical trials, as well as in obtaining regulatory approvals of those product candidates in the United States and in foreign countries. Our current and potential future competitors may also have significantly more experience commercializing drugs that have been approved for marketing. If we are not able to compete effectively against existing and potential competitors, our business and financial condition may be harmed.
Mergers and acquisitions in the pharmaceutical and biotechnology industries could result in even more resources being concentrated among a small number of our competitors. Competition may reduce the number and types of patients available to us to participate in clinical trials, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors.
Competition may further increase as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, drugs that are more effective or less costly than any product candidate that we may develop.
Any inability to successfully complete clinical development of a product candidate could result in additional costs or impair or eliminate our ability to generate revenue from future sales of such product candidate, if approved, or from any regulatory and commercialization milestone with respect to such product candidate. In addition, if we make manufacturing or formulation changes to MLE-301 or any future product candidates, we may need to conduct additional testing to bridge our modified product candidates to earlier versions. Clinical trial delays, including in the recently initiated Phase 1 clinical trial of MLE-301, could also shorten any periods during which we may have the exclusive right to commercialize MLE-301 or any future product candidates, or allow our competitors to bring comparable drugs to market before we do, which could impair our ability to successfully commercialize MLE-301 or any future product candidates, and may harm our business, financial condition and results of operations.
Established pharmaceutical and biotechnology companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make MLE-301 or any future product candidate less competitive. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent protection, discovering, developing and receiving FDA or other regulatory authority approval, or commercializing drugs before we do, which would have an adverse impact on our business and results of operations.
The availability of our competitors’ products could limit the demand and the price we are able to charge for any product candidate we develop. The inability to compete with existing or subsequently introduced drugs would harm our business, prospects, financial condition and results of operations.
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and even if we obtain approval for a product candidate in one country or jurisdiction, we may never obtain approval for, or commercialize, that product candidate in any other jurisdiction, which would limit our ability to realize our full market potential.
Prior to obtaining approval to commercialize a product candidate in any jurisdiction, we or our collaborators must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or foreign regulatory agencies, that such product candidates are safe and effective for their intended uses. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if our product candidates meet their safety and efficacy endpoints in clinical trials, the FDA or foreign regulatory agencies may believe the clinical trials do not show the appropriate balance of safety and efficacy in the indication being sought or may interpret the data differently than we do, and deem the results insufficient to demonstrate the appropriate balance of safety and efficacy at the level required for product approval. Further, the regulatory authorities may not complete their review processes in a timely manner, or we may otherwise not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future
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legislation or administrative action, or changes in regulatory authority policy during the period of product development, clinical trials and the review process.
Further, in order to market any products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in any other country or jurisdiction. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for us and require additional preclinical studies or clinical trials, which could be costly and time consuming. We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of any product we develop will be unrealized.
The FDA or any foreign regulatory bodies can delay, limit or deny approval of our product candidates or require us to conduct additional preclinical or clinical testing or abandon a program for many reasons, including:
the FDA or the applicable foreign regulatory agency’s disagreement with the design or implementation of our clinical trials;
negative or ambiguous results from our clinical trials or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory agencies for approval;
serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates;
our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory body that our product candidates are safe and effective for the proposed indication;
the FDA’s or the applicable foreign regulatory agency’s disagreement with the interpretation of data from preclinical studies or clinical trials;
our inability to demonstrate the clinical and other benefits of our product candidates outweigh any safety or other perceived risks;
the FDA’s or the applicable foreign regulatory agency’s requirement for additional preclinical studies or clinical trials;
the FDA’s or the applicable foreign regulatory agency’s disagreement regarding the formulation, labeling or the specifications of our product candidates;
the FDA’s or the applicable foreign regulatory agency’s failure to approve the manufacturing processes or facilities of third-party manufacturers with which we contract, including failure of such manufacturers to pass the required pre-approval inspections; or
the potential for approval policies or regulations of the FDA or the applicable foreign regulatory agencies to significantly change in a manner rendering our clinical data insufficient for approval.
Even if we eventually complete clinical testing and receive approval of an NDA or foreign marketing application for our product candidates, the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials, including Phase 4 clinical trials, or the implementation of a Risk Evaluation and Mitigation Strategy (“REMS”), which may be required to ensure safe use of the drug after approval. The FDA or the applicable foreign regulatory agency also may approve a product candidate for a more limited indication or patient population than we originally requested, and the FDA or applicable foreign regulatory agency may not approve the labeling that we believe is necessary or desirable for the successful commercialization of a product candidate. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of that product candidate and would negatively impact our business and results of operations.
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If we are not able to obtain orphan drug designations or exclusivity for any of our current or future product candidates for which we seek such designation, the potential profitability of any such product candidates could be limited.
Regulatory authorities in some jurisdictions, including the United States, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a product as an orphan drug if the treatment is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States. Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for a disease for which it receives the designation, then the product is entitled to a period of marketing exclusivity that precludes the applicable regulatory authority from approving another marketing application for the same product for the same disease for the exclusivity period except in limited situations. For purposes of small molecule drugs, the FDA defines “same drug” as a drug that contains the same active moiety and is intended for the same use as the drug in question.
We have received orphan drug designation from the FDA and the EMA for previous product candidates, and we may seek orphan drug designation, where applicable, for our current product candidates in additional indications or for our future product candidates. However, obtaining an orphan drug designation can be difficult and we may not be successful in doing so for any of our c