Table of Contents
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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
    
    
    
to
    
    
    
    
               
Commission file number:
001-37539
 
 
Global Blood Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
27-4825712
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
181 Oyster Point Boulevard
South San Francisco, CA 94080
(Address of principal executive offices)
(650)
741-7700
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value $0.001 per share
 
GBT
 
The NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated
filer
     Smaller 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 Exchange Act).    Yes  ☐    
No  
As of April 30, 2021, there were 62,266,753 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.
 
 
 

 
Table of Contents
TABLE OF CONTENTS
 
        
Page
 
     3  
Item 1.
       3  
  Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020      3  
       4  
       5  
       6  
  Notes to Unaudited Condensed Consolidated Financial Statements      7  
Item 2.
  Management’s Discussion and Analysis of Financial Condition and Results of Operations      16  
Item 3.
  Quantitative and Qualitative Disclosures About Market Risk      23  
Item 4.
  Controls and Procedures      23  
     23  
Item 1.
       23  
Item 1A.
       23  
Item 2.
       64  
Item 3.
       64  
Item 4.
       64  
Item 5.
       64  
Item 6.
       64  
     66  
 
2


Table of Contents
PART I. – FINANCIAL INFORMATION
 
Item 1.
Financial Statements
GLOBAL BLOOD THERAPEUTICS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
 
    
March 31, 2021
   
December 31, 2020
 
    
(Unaudited)
       
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 445,310     $ 494,766  
Short-term marketable securities
     36,736       66,126  
Accounts receivable, net
     18,265       17,500  
Inventories
     42,267       40,223  
Prepaid expenses and other current assets
     15,554       13,548  
    
 
 
   
 
 
 
Total current assets
     558,132       632,163  
Property and equipment, net
     38,050       37,882  
Operating lease
right-of-use
assets
     50,085       50,722  
Restricted cash
     2,420       2,436  
Other assets, noncurrent
     1,211       799  
    
 
 
   
 
 
 
Total assets
   $ 649,898     $ 724,002  
    
 
 
   
 
 
 
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
Accounts payable
   $ 10,376     $ 19,078  
Accrued liabilities
     28,845       31,133  
Accrued compensation
     14,709       23,985  
Operating lease liabilities, current
     5,037       4,836  
    
 
 
   
 
 
 
Total current liabilities
     58,967       79,032  
Long-term debt
     149,052       148,815  
Operating lease liabilities, noncurrent
     77,862       79,176  
Other liabilities, noncurrent
     822       822  
    
 
 
   
 
 
 
Total liabilities
     286,703       307,845  
    
 
 
   
 
 
 
Commitments and contingencies
                
Stockholders’ equity:
                
Preferred stock, $0.001 par value, 5,000,000 shares authorized as of March 31, 2021 (unaudited) and December 31, 2020; no shares issued and outstanding
     —         —    
Common stock, $0.001 par value, 150,000,000 shares authorized as of March 31, 2021 (unaudited) and December 31, 2020, respectively; 62,240,050 and 61,898,090 shares issued and outstanding as of March 31, 2021 (unaudited) and December 31, 2020, respectively
     62       62  
Additional
paid-in
capital
     1,424,411       1,402,262  
Accumulated other comprehensive income
     121       302  
Accumulated deficit
     (1,061,399     (986,469
    
 
 
   
 
 
 
Total stockholders’ equity
     363,195       416,157  
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
   $ 649,898     $ 724,002  
    
 
 
   
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
3

Table of Contents
GLOBAL BLOOD THERAPEUTICS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share amounts)
 
    
Three Months Ended March 31,
 
    
2021
   
2020
 
Product sales, net
   $ 39,043     $ 14,118  
Costs and operating expenses:
                
Cost of sales
     584       135  
Research and development
     50,857       39,773  
Selling, general and administrative
     58,966       47,662  
    
 
 
   
 
 
 
Total costs and operating expenses
     110,407       87,570  
    
 
 
   
 
 
 
Loss from operations
     (71,364     (73,452
Other income (expense):
                
Interest income
     329       2,856  
Interest expenses
     (3,689     (2,314
Other expenses, net
     (206     (116
    
 
 
   
 
 
 
Total other income (expense), net
     (3,566     426  
    
 
 
   
 
 
 
Net loss
     (74,930     (73,026
Other comprehensive income:
                
Net unrealized gain (loss) on marketable securities, net of tax
     (181     461  
    
 
 
   
 
 
 
Comprehensive loss
   $ (75,111   $ (72,565
    
 
 
   
 
 
 
Basic and diluted net loss per common share
   $ (1.21   $ (1.20
    
 
 
   
 
 
 
Weighted-average number of shares used in computing basic and diluted net loss per common share
     62,101,070       60,787,710  
    
 
 
   
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
4

 
Table of Contents
GLOBAL BLOOD THERAPEUTICS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)
 
    
Common Stock
    
Additional
Paid-
In Capital
   
Accumulated
Other
Comprehensive
Income
   
Accumulated
Deficit
   
Total
Stockholders’
Equity
 
    
 
Shares
    
Amount
 
Balance at December 31, 2020
     61,898,090      $ 62      $ 1,402,262     $ 302     $ (986,469   $ 416,157  
Issuance of common stock upon exercise of stock options
     47,763        —          1,110       —         —         1,110  
Issuance of common stock upon vesting of restricted share units, net of shares withheld for employee taxes
     229,087        —          (1,897     —         —         (1,897
Issuance of common stock pursuant to ESPP purchases
     65,110        —          2,558       —         —         2,558  
Stock-based compensation
     —          —          20,378       —         —         20,378  
Net unrealized gain on marketable securities
     —          —          —         (181     —         (181
Net loss
     —          —          —         —         (74,930     (74,930
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at March 31, 2021
     62,240,050      $ 62      $ 1,424,411     $ 121     $ (1,061,399   $ 363,195  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
 
    
Common Stock
    
Additional
Paid-
In Capital
   
Accumulated
Other
Comprehensive
Income
    
Accumulated
Deficit
   
Total
Stockholders’
Equity
 
    
 
Shares
    
Amount
 
Balance at December 31, 2019
     60,644,380      $ 61      $ 1,316,795     $ 754      $ (738,916   $ 578,694  
Issuance of common stock upon exercise of stock options
     33,937        —          967       —          —         967  
Issuance of common stock upon vesting of restricted share units, net of shares withheld for employee taxes
     160,594        —          (2,099     —          —         (2,099
Issuance of common stock pursuant to ESPP purchases
     47,460        —          1,870       —          —         1,870  
Stock-based compensation
     —          —          16,705       —          —         16,705  
Net unrealized gain on marketable securities
     —          —          —         461        —         461  
Net loss
     —          —          —         —          (73,026     (73,026
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
Balance at March 31, 2020
     60,886,371      $ 61      $ 1,334,238     $ 1,215      $ (811,942   $ 523,572  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
5

 
Table of Contents
GLOBAL BLOOD THERAPEUTICS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
    
Three Months Ended March 31,
 
    
    
2021
    
   
    
2020
    
 
CASH FLOWS FROM OPERATING ACTIVITIES:
                
Net loss
   $ (74,930   $ (73,026
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation and amortization
     1,404       2,238  
Amortization (accretion) of premium (discount) on marketable securities
     75       (101
Non-cash
interest expense
     237       412  
Amortization of operating lease
right-of-use
assets
     637       693  
Stock-based compensation
     19,948       16,367  
Changes in operating assets and liabilities:
                
Accounts receivables
     (765     (1,941
Inventories
     (1,569     (13,218
Prepaid expenses and other assets, current
     (2,041     (147
Other assets,
non-current
     (415     —    
Accounts payable
     (8,544     2,567  
Accrued liabilities
     (2,904     (6,766
Accrued compensation
     (9,276     (6,309
Operating lease liabilities
     (1,113     1,762  
Other liabilities
     —         (1,153
Net cash used in operating activities
     (79,256     (78,622
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Purchase of property and equipment
     (1,130     (2,524
Purchase of marketable securities
     —         (57,936
Maturities of marketable securities
     29,134       151,586  
Net cash provided by investing activities
     28,004       91,126  
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Proceeds from issuance of common stock in settlement of employee stock purchase plan and exercise of stock options
     3,703       2,968  
Payments of debt issuance costs
     (26     (85
Tax paid related to net share settlement of equity awards
     (1,897     (2,099
Net cash provided by financing activities
     1,780       784  
Net increase (decrease) in cash, cash equivalents and restricted cash
     (49,472     13,288  
Cash, cash equivalents and restricted cash at beginning of period
     497,202       304,632  
Cash, cash equivalents and restricted cash at end of period
   $ 447,730     $ 317,920  
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
                
Cash paid for interest
   $ 3,375     $ 1,706  
SUPPLEMENTAL DISCLOSURES OF
NON-CASH
INVESTING AND FINANCING INFORMATION:
                
Leasehold improvements paid for by landlord
   $ —       $ 9,461  
Accrued purchase of property and equipment
   $ 484     $ 563  
Accrued issuance costs
   $ (26   $ (85
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH TO THE CONDENSED CONSOLIDATED BALANCE SHEETS
                 
Cash, cash equivalents
   $ 445,310      $ 315,525  
Restricted cash
     2,420        2,395  
Total cash and cash equivalents and restricted cash
   $ 447,730      $ 317,920  
    
 
 
    
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
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GLOBAL BLOOD THERAPEUTICS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Organization
Global Blood Therapeutics, Inc., or the Company, we, us, or our, was incorporated in Delaware in February 2011 and commenced operations in May 2012. We are a biopharmaceutical company dedicated to the discovery, development and delivery of life-changing treatments that provide hope to underserved patient communities. In late November 2019, we received U.S. Food and Drug Administration, or FDA, accelerated approval for our first medicine, Oxbryta
®
(voxelotor) tablets for the treatment of sickle cell disease, or SCD, in adults and children 12 years of age and older. In early December 2019, we began to make Oxbryta available to patients through our specialty pharmacy partner network. Our principal operations are based in South San Francisco, California, and we operate in one segment.
Need for Additional Capital
In the course of our development activities, we have sustained operating losses and we expect such losses to continue over the next several years. Our ultimate success depends on the outcome of our commercialization of Oxbryta and research and development activities. Since inception through March 31, 2021, we have incurred cumulative net losses of $1.06 billion. We expect to incur additional losses for the foreseeable future to commercialize Oxbryta and conduct product research and development, and expect to potentially raise additional capital to fully implement our business plan. If needed, we intend to raise such capital through borrowings, the issuance of additional equity, and potentially through strategic alliances with partner companies or other transactions. However, if such financing is not available at adequate levels, we will need to
re-evaluate
our operating plans. We believe that our existing cash and cash equivalents and marketable securities will be sufficient to fund our cash requirements for at least 12 months subsequent to the issuance of these financial statements.
2. Summary of Significant Accounting Policies
Basis of Preparation and Presentation of Financial Information
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and, accordingly, the balance sheet as of December 31, 2020, has been derived from audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as our annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of our financial information. The results of operations for the three months ended March 31, 2021, are not necessarily indicative of the results to be expected for the year ending December 31, 2021, or for any other interim period or for any other future year.
The accompanying unaudited interim condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2020, included in our Annual Report on Form
10-K,
filed with the SEC on February 24, 2021.
Use of Estimates
The preparation of the accompanying unaudited interim condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of variable consideration and costs and expenses during the reporting period. We base our estimates and assumptions on historical experience when available and on various factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results could differ from these estimates under different assumptions or conditions.
Concentration of Risk
Credit Risk
We invest in a variety of financial instruments and, by our Board approved investment policy, limit the amount of credit exposure with any one issuer, industry or geographic area for investments other than instruments backed by the U.S. federal government.
 
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Major Customers
We have entered into distribution agreements with certain limited specialty pharmacies and specialty distributors. For the three months ended March 31, 2021, our two largest customers represented approximately 85% of our product revenue and approximately 78% of our accounts receivable balance at March 31, 2021.
Major Suppliers
We do not currently have any of our own manufacturing facilities, and therefore depend on an outsourced manufacturing strategy for the production of Oxbryta for commercial use and for the production of our product candidates for clinical trials. We have contracts in place with one third-party manufacturer that is approved for the commercial production of Oxbryta and one third-party supplier that is approved for Oxbryta’s active pharmaceutical ingredient. Although there are potential sources of supply other than our existing manufacturers and suppliers, any new supplier would be required to qualify under applicable regulatory requirements.
Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.
Significant Accounting Policies
Except as noted below, there have been no material revisions in our significant accounting policies described in Note 2 to the consolidated financial statements included in our Annual Report on Form
10-K
for the year ended December 31, 2020.
Accounting Pronouncements Adopted
In December 2019, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU,
No. 2019-12,
Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes
. The new guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. ASU
2019-12
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and the applicable amendments will be applied on a prospective basis. We adopted ASU
No. 2019-12
in the first quarter of 2021 and applied the guidance prospectively. The only aspect of ASU
2019-12
that is currently applicable to us is the removal of the exception related to intraperiod tax allocation. We began applying the general methodology regarding the intraperiod allocation of tax expense in 2021. After the adoption of ASU
2019-12,
in periods where we have a loss from continuing operations, the amount of taxes attributable to continuing operations will be determined without regard to the tax effect of other items, including changes in unrealized gains related to marketable securities. The adoption of this new standard did not have a material impact on our condensed consolidated financial statements.
In August 2020, FASB issued A
S
U
No. 2020-08,
Codification Improvement to Subtopic
310-20,
Receivables – Nonrefundable Fees and Other Costs
. The new guidance states that an entity should reevaluate whether a callable debt security is within scope of Topic
310-20.
ASU
2020-08
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We adopted ASU
No. 2020-08
in the first quarter of 2021 and applied the guidance prospectively. The adoption of this new standard did not have a material impact on our condensed consolidated financial statements.
Accounting Pronouncement Issued But Not Yet Adopted
In March 2020, FASB issued ASU
No. 2020-04,
Reference Rate Reform (Topic 848). The new guidance contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU
2020-04
is optional and may be elected over time as reference rate reform activities occur. We continue to evaluate the impact of the guidance and may apply the elections as applicable as changes occur
.
3. Fair Value Measurements
Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Our financial instruments consist of cash and cash equivalents, marketable securities, accounts receivables, accounts payable and accrued liabilities. Cash and cash equivalents, marketable securities and restricted cash are reported at their respective fair values on our condensed consolidated balance sheets. The remaining financial instruments are reported on our condensed consolidated balance sheets at cost that approximate current fair values due to their relatively short maturities.
 
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Assets and liabilities recorded at fair value on a recurring basis in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level
 1
– Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level
 2
– Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level
 3
– Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.
The following table summarizes our financial assets measured at fair value on a recurring basis (in thousands):
 
    
March 31, 2021
 
    
Total
    
Level 1
    
Level 2
    
Level 3
 
Financial Assets:
                                   
Money market funds
   $ 389,448      $ 389,448      $ —        $ —    
Corporate debt securities
     19,639        —          19,639        —    
U.S. government agency securities
     6,802        —          6,802        —    
Certificates of deposits
     241        —          241        —    
U.S. government securities
     10,054        —          10,054        —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Total financial assets
   $ 426,184      $ 389,448      $ 36,736      $ —    
    
 
 
    
 
 
    
 
 
    
 
 
 
 
    
December 31, 2020
 
    
Total
    
Level 1
    
Level 2
    
Level 3
 
Financial Assets:
                                   
Money market funds
   $ 486,174      $ 486,174      $ —        $ —    
Corporate debt securities
     29,804        —          29,804        —    
U.S. government agency securities
     15,943        —          15,943        —    
Certificates of deposits
     243        —          243        —    
U.S. government securities
     20,136        —          20,136        —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Total financial assets
   $ 552,300      $ 486,174      $ 66,126      $ —    
    
 
 
    
 
 
    
 
 
    
 
 
 
We estimate the fair values of our investments in corporate debt securities, government and government related securities and certificates of deposits by taking into consideration valuations obtained from third-party pricing services. The fair value of our marketable securities classified within Level 2 is based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads,
two-sided
markets, benchmark securities, bids, offers and reference data including market research publications. At March 31, 2021, and December 31, 2020, the weighted average remaining contractual maturities of our Level 2 investments was less than one year and all of these investments are rated
A-1/P-1
or A/A2, or higher, by Moody’s and Standard & Poor’s.
 
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4.
Available-for-Sale
Securities
Estimated fair values of
available-for-sale
securities are generally based on prices obtained from commercial pricing services. The following table is a summary of
available-for-sale
securities recorded in cash and cash equivalents, restricted cash, or marketable securities in our condensed consolidated balance sheets (in thousands):
 
   
March 31, 2021
   
December 31, 2020
 
   
Amortized
Cost
   
Unrealized
Gains
   
Unrealized
(Losses)
   
Estimated Fair
Value
   
Amortized
Cost
   
Unrealized
Gains
   
Unrealized
(Losses)
   
Estimated Fair
Value
 
Financial Assets:
                                                               
Money market funds
  $ 389,448     $  —       $  —       $ 389,448     $ 486,174     $  —       $  —       $ 486,174  
Corporate debt securities
    19,563       76       —         19,639       29,641       163       —         29,804  
U.S. government agency securities
    6,800       2       —         6,802       15,906       37       —         15,943  
Certificates of deposits
    240       1       —         241       241       2       —         243  
U.S. government securities
    10,012       42       —         10,054       20,036       100       —         20,136  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $ 426,063     $ 121     $  —       $ 426,184     $ 551,998     $ 302     $  —       $ 552,300  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table summarizes the classification of the
available-for-sale
securities on our condensed consolidated balance sheets (in thousands):
 
    
March 31, 2021
    
December 31, 2020
 
Cash and cash equivalents
   $ 389,448      $ 486,174  
Short-term marketable securities
     36,736        66,126  
    
 
 
    
 
 
 
Total
   $ 426,184      $ 552,300  
    
 
 
    
 
 
 
We do not intend to sell the investments that are in an unrealized loss position, and it is unlikely that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity.
5. Balance Sheet Components
Inventories
Inventories consist of the following (in thousands):
 
    
March 31, 2021
    
December 31, 2020
 
Raw materials
   $ 10,632      $ 11,273  
Work-in-process
     28,656        26,994  
Finished goods
     2,979        1,956  
    
 
 
    
 
 
 
Total inventories
   $ 42,267      $ 40,223  
    
 
 
    
 
 
 
For the quarter ended March 31, 2021, we have capitalized $430,000 
of share-based compensation expense and 
$45,000 
of depreciation expenses to our inventories. For the quarter ended March 31, 2020, we have capitalized $337,000 of share-based compensation expense and $96,000 of depreciation expenses to our inventories. See Note 8—Share-based Compensation for details on share-based compensation expenses recognized during the quarter ended March 31, 2021.
 
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Property and Equipment
Property and equipment consists of the following (in thousands):
 
    
March 31, 2021
    
December 31, 2020
 
Laboratory equipment
   $ 12,264      $ 11,922  
Computer equipment
     3,024        3,023  
Leasehold improvements
     32,281        32,281  
Construction-in-progress
     1,788        517  
    
 
 
    
 
 
 
Total property and equipment
     49,357        47,743  
Less: accumulated depreciation and amortization
     (11,307      (9,861
    
 
 
    
 
 
 
Property and equipment, net
   $ 38,050      $ 37,882  
    
 
 
    
 
 
 
Accrued liabilities
Accrued liabilities consist of the following (in thousands):
 
    
March 31, 2021
    
December 31, 2020
 
Accrued research and development costs
   $ 8,121      $ 10,677  
Accrued manufacturing costs
     7,631        9,125  
Accrued professional and consulting services
     5,199        4,107  
Accrued sales deductions
     7,010        6,405  
Other
     884        819  
    
 
 
    
 
 
 
Total accrued liabilities
   $ 28,845      $ 31,133  
    
 
 
    
 
 
 
6. Long-term Debt
Term Loan
On December 17, 2019, we entered into the Loan Agreement, or Term Loan, with funds managed by Pharmakon Advisors LP, which are BioPharma Credit PLC, as collateral agent, Biopharma Credit Investments V (Master) LP, as a lender, and BPCR Limited Partnership, as a lender, and collectively, the Lenders, for a senior secured credit facility consisting of an initial tranche of $75.0 million and the option to draw an additional $75.0 million until December 31, 2020. The first tranche, in the amount of $75.0 million, was funded in connection with the closing date of the Term Loan in December 2019, and the second tranche in the amount of $75.0 million was funded in November 2020.
The Term Loan carries a
72-month
term. The Term Loan bears interest at a floating per annum interest rate equal to 7.00% plus the greater of (a) the
3-month
LIBOR rate and (b) 2%. In the event we default, the interest rate would be 3% above the rate that is otherwise applicable thereto. Interest on amounts outstanding are payable quarterly in arrears. The Term Loan repayment schedule provides for interest only payments for the first 39 months, followed by consecutive equal quarterly payments of principal and interest commencing in March 2023 and continuing through the maturity in December 2025.
We have the option to prepay all or a portion of the borrowed amounts under the Term Loan. If we exercise this option, we must pay a prepayment fee between 1% and 3% of the principal amount being prepaid depending on the timing of the prepayment, or Prepayment Fee. If the prepayment occurs before December 2022, we must also pay an amount equal to the sum of all interest that would have accrued and been payable from date of prepayment through December 2022, or Make Whole Amount. We are obligated to pay an additional fee to the Lenders determined by multiplying the principal amount being paid or prepaid multiplied by 2%, or Paydown Fee, when such payments are made.
In the event of default or change in control, all unpaid principal and all accrued and unpaid interest amounts (if any) become immediately due and payable, at which point, we will be subject to the Prepayment Fee, the Make Whole Amount (if any) and the Paydown Fee. Events of default include, but are not limited to, a payment default, a material adverse change, and insolvency. The obligations under the Term Loan are secured by a first priority security interest in and a lien on substantially all of our assets, subject to certain exceptions.
 
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Debt issuance costs paid directly to the Lenders of $1.1 million and the other debt issuance costs of $0.5 million were treated as discounts on the Term Loan. These debt discounts along with the Paydown Fee are being amortized or accreted to interest expenses throughout the life of the Term Loan using the effective interest rate method. In addition, we paid the Lenders $1.1 million for the option to draw the additional $75.0 million, which was capitalized as a deferred asset and amortized on a straight-line basis through December 31, 2020. Any remaining unamortized amount was reclassed to debt discount at the time of closing of the second tranche of the Term Loan. We closed the second tranche of the Term Loan in November 2020, and $0.2 million of the unamortized deferred asset related to the option to draw the second tranche was reclassed as the discount on the notes payable. As of March 31, 2021, there were unamortized issuance costs and debt discounts of $1.5 million, which were recorded as a direct deduction from the Term Loan on the condensed consolidated balance sheet.
Future payments of principal and interest on the Term Loan as of March 31, 2021 (in thousands):
 
2021 (nine months)
     10,125  
2022
     13,500  
2023
     62,813  
2024
     58,313  
2025
     53,812  
    
 
 
 
Total minimum payments
     198,563  
Less amount representing interest
     (45,563
Less amount representing Paydown Fee
     (3,000
    
 
 
 
Long-term debt, gross
     150,000  
Discount on notes payable
     (1,539
Accretion of Paydown Fee
     591  
    
 
 
 
Long-term debt
   $ 149,052  
    
 
 
 
7. Commitments and Contingencies
Leases
We have operating leases for our headquarters in South San Francisco, where we have office and research and development laboratory facilities, and equipment. Our leases have remaining lease terms of 1 to 10 years. Most of these leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases include renewal options at our election, with renewal terms that can extend the lease term from 1 to 10 years. These optional periods have not been considered in the determination of the
right-of-use
assets, or ROU assets, or lease liabilities associated with these leases as we did not consider it reasonably certain that we would exercise the options.
Lease costs included in operating expense in
the condensed consolidated statement 
of operations and comprehensive loss in relation to these operating leases were $3.2 million and $3.1 million for the three months ended March 31, 2021, and 2020, respectively. Included in these lease costs were variable lease costs, which were not included within the measurement of our operating ROU assets and operating lease liabilities in the amount of $0.7 million and $0.7 million for the three months ended March 31, 2021, and 2020, respectively. The variable lease cost is comprised primarily of our cost in certain research and development arrangements that contain embedded equipment, and our proportionate share of operating expenses, property taxes, and insurance in relation with our facility lease. These costs are classified as operating lease expense due to our election to not separate lease and
non-lease
components.
Supplemental information related to leases for the period reported is as follows (in thousands, except weighted-average remaining lease term and weighted-average discount rate):
 
    
Three Months Ended March 31,
 
    
    2021    
   
    2020    
 
Cash paid for amounts included in the measurement of lease liabilities
     2,904       1,153  
Weighted-average remaining lease term of operating leases (in years)
     9.0       10  
Weighted-average discount rate of operating leases
     8.66     8.66

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The majority of our l
e
ase costs are driven by our operating lease for our headquarters, where we have office and research and development laboratory facilities.
In March 2017, we entered into a noncancelable operating lease, or Original Lease, for approximately 67,185 square feet of space in South San Francisco, California, or Prior Premises. The Original Lease term commenced in November 2017 as we gained control over physical access to the Prior Premises
for a 10-year period.
In August 2018, we entered into an amendment to the Original Lease, or Lease Amendment, to relocate the leased premises from the Prior Premises to a
to-be-constructed
building consisting of approximately 164,150 rentable square feet of space, or Substitute Premises, when the Substitute Premises were ready for occupancy, or Substitute Premises Payment Commencement Date. The Lease Amendment has a contractual term, or Substitute Premises Term, of 10 years from the Substitute Premises Payment Commencement Date. The Lease Amendment grants us an option to extend the Lease Amendment for an additional
10-year
period. Future minimum rental payments under the Lease Amendment during the
10-year
term are $121.5 million in the aggregate. Under the Lease Amendment, we are obligated to pay to the landlord certain costs, including taxes and operating expenses. The Lease Amendment also provides a tenant inducement allowance of up to $27.9 million, of which $4.1 million, if utilized, would be repaid to the landlord in the form of additional monthly rent with interest applied. As of March 31, 2021, we have capitalized $32.3 million of costs within property and equipment, net for construction of leasehold improvements at the Substitute Premises, which were mostly acquired with the tenant inducement provided under the Lease Amendment.
After relocating to the Substitute
Premises
, we surrendered and delivered the Prior Premises to the landlord in May 2020, upon which time we had no further obligations with respect to the Prior Premises other than with respect to the Initial Allowance, which we will repay to the landlord in the form of additional monthly rent with interest applied over the term of the Original Lease through November 2027. Upon signing of the Lease Amendment, we
re-evaluated
the remaining useful life of the leasehold improvements at the Prior Premises and started to amortize the leasehold improvements over the remaining period of expected use, resulting in an acceleration of depreciation expenses for approximately $1.9 million for the three months ended March 31, 2020. No
acceleration of depreciation 
expense was recorded for the three months ended March 31, 2021.
As of March 31, 2021, the maturities of our operating lease liabilities were as follows (in thousands):
 
Year ending December 31,
  
Amount
 
2021 (nine months)
     8,937  
2022
     12,222  
2023
     12,584  
2024
     12,948  
2025
     13,368  
Thereafter
     60,507  
    
 
 
 
Total lease payments
     120,566  
Less: Imputed interest
     (37,667
    
 
 
 
Present value of operating lease liabilities
   $ 82,899  
    
 
 
 
The operating leases require us to share in prorated operating expenses and property taxes based upon actual amounts incurred; those amounts are not fixed for future periods and, therefore, are not included in the future commitments listed above.
Contingencies
In the ordinary course of business, we may be subject to legal claims and regulatory actions that could have a material adverse effect on our business or financial position. We assess our potential liability in such situations by analyzing potential outcomes, assuming various litigation, regulatory and settlement strategies. If we determine a loss is probable and its amount can be reasonably estimated, we accrue an amount equal to the estimated loss.
No losses and no provision for a loss contingency have been recorded to date.
8. Stock-Based Compensation
We have three stock-based compensation plans – the Amended and Restated 2017 Inducement Equity Plan, or 2017 Inducement Plan, the Amended and Restated 2015 Stock Option and Incentive Plan, or 2015 Plan, and the 2012 Stock Option and Grant Plan, or 2012 Plan. As of March 31, 2021, there were 2,114,286 shares reserved under the 2017 Inducement Plan and 4,809,892 shares 
 
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reserved under the 2015 Plan for the future issuance of equity awards. Upon adoption of the 2015 Plan in July 2015, no new awards or grants are permitted under the 2012 Plan. See Note 10 to the Consolidated Financial Statements included in our Annual Report on Form
10-K
for the year ended December 31, 2020, for additional information related to these stock-based compensation plans.
Stock Options
The following summarizes option activity under the 2017 Inducement Plan, 2015 Plan and 2012 Plan:
 
    
Number of
Options
    
Weighted-
Average
Exercise Price
 
Outstanding — December 31, 2020
     3,327,330      $ 42.07  
Options granted
     576,768        44.48  
Options exercised
     (47,763      23.24  
Options canceled
     (41,493      57.37  
    
 
 
    
 
 
 
Outstanding — March 31, 2021
     3,814,842      $ 42.51  
    
 
 
    
 
 
 
The fair values of stock options granted to employees were calculated using the following assumptions:
 
    
Three Months Ended
March 31,
    
2021
  
2020
Expected term (in years)
  
5.8-6.1
   6.1
Volatility
  
72.6%-72.7%
  
69.6%-69.9%
Risk-free interest rate
  
0.9%-1.0%
  
1.4%-1.8%
Dividend yield
     
Restricted Stock Units
The following table summarizes activity of restricted stock units, or RSUs, granted to employees with service-based vesting under the 2017 Inducement Plan and 2015 Plan and related information:
 
    
Number
of RSUs
    
Weighted-
Average
Grant Date Fair
Value
 
Non-vested
units — December 31, 2020
     2,210,356      $ 57.80  
RSUs granted
     1,255,399        44.87  
RSUs vested
     (267,629      54.41  
RSUs forfeited
     (94,999      56.87  
    
 
 
          
Non-vested
units — March 31, 2021
     3,103,127      $ 52.89  
    
 
 
          
Market-Condition Awards Granted to Employees
2020 Market-Condition RSU Awards
The Compensation Committee of our Board of Directors granted, effective June 1, 2020, awards of up to an aggregate of 414,700 RSUs to certain of our senior management, including our executive officers, under the 2015 Plan, the vesting of which is contingent upon the achievement of three escalating stock price targets, which we refer to as the 2020 Market-Condition RSU Awards. Upon the achievement of the respective stock price targets, 50% of the RSUs allotted to that tranche will vest, while the remaining 50% will vest on the first anniversary of the date the stock price target was achieved, subject to the employee’s continued employment or other service relationship with us through such vesting date. Under the terms of the awards, if the stock price targets are not achieved for all or some of the tranches on or before June 30, 2024, the unvested awards will be automatically terminated and forfeited. The compensation cost for the RSUs with a market condition is not reversed when the market condition is not satisfied. The target prices and vesting tranches are set forth in the table below:
 
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Table of Contents
Stock Price Targets
  
Number of Units Allotted
 
$109.20
     82,940  
$145.60
     145,145  
$182.00
     186,615  
 
The grant date fair value of the 2020 Market-Condition RSU Awards was estimated using a Monte Carlo simulation model, which includes variables such as the expected volatility of the Company’s share price and interest rates to generate potential future outcomes. We recognize the related compensation expense on a straight-line basis over the applicable derived service periods, which are the estimated periods of time that would be required to satisfy the market conditions.
For the three months ended March 31, 2021, no 2020 Market-Condition RSU Awards were granted, vested, or forfeited. The number of units outstanding was 414,700 and 414,700 as of March 31, 2021 and December 31, 2020, respectively. The weighted average grant date fair value was $49.95 and $49.95 was of March 31, 2021 and December 31, 2020, respectively. The aggregate intrinsic value for the outstanding 2020 Market-Condition RSU Awards was $16.9 million as of March 31, 2021.
At March 31, 2021, total unrecognized compensation expense related to
non-vested
2020 Market-Condition RSU Awards was $
9.9 
million, which is expected to be recognized over their respective remaining derived service periods. The weighted average derived service period is
0.96
 
years. For the three months ended March 31, 2021, we recognized $
3.1 
million in stock-based compensation expense related to the 2020 Market-Condition RSU Awards.
Stock-Based Compensation Expense
Total stock-based compensation recognized by function included in the condensed consolidated statements of operations and comprehensive loss was as follows (in thousands):
 
    
Three Months Ended
March 31,
 
    
2021
    
2020
 
Research and development
   $ 4,879      $ 5,350  
Selling, general and administrative
     15,069        11,017  
    
 
 
    
 
 
 
Total stock-based compensation expense
   $ 19,948      $ 16,367  
    
 
 
    
 
 
 
9. Net Loss per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Since we were in a loss position for all periods presented, diluted net loss per share is the same as basic net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.
The following securities were not included in the diluted net loss per share calculations because their effect was anti-dilutive:
 
    
Three Months Ended
March 31,
 
    
2021
    
2020
 
Options to purchase common stock
     3,814,842        4,133,721  
Restricted stock units
     3,517,827        2,691,159  
    
 
 
    
 
 
 
Total
     7,332,669        6,824,880  
    
 
 
    
 
 
 
 
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Table of Contents
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form
10-Q
and with our audited consolidated financial statements and related notes thereto for the year ended December 31, 2020, included in our Annual Report on Form
10-K
filed with the Securities and Exchange Commission on February 24, 2021, or our Annual Report.
This discussion and other parts of this Quarterly Report on Form
10-Q
contain 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, that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. In some cases you can identify forward-looking statements by terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this Quarterly Report on Form
10-Q
titled “Risk Factors.” We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements.
Overview
We are a biopharmaceutical company dedicated to the discovery, development and delivery of life-changing treatments that provide hope to underserved patient communities. Founded in 2011, our goal is to transform the treatment and care of sickle cell disease, or SCD, a lifelong, devastating inherited blood disorder that is marked by red blood cell, or RBC, destruction and occluded blood flow and hypoxia, which leads to anemia, stroke, multi-organ failure, severe pain crises, and shortened patient life span. Our mission is driven by the historical lack of understanding, investment and attention given to SCD. Although the fundamental cause of SCD has been understood for decades, therapeutic innovation and access to care has significantly lagged compared to many other rare diseases. For example, there are approximately three times more individuals in the U.S. living with SCD than cystic fibrosis, or CF. However, since the enactment of the Orphan Drug Act passed in 1983, only four drugs have been approved for SCD compared to at least 15 drugs approved for CF. As a result of the lack of treatment options, patients with SCD suffer serious morbidity and premature mortality.
In November 2019, the U.S. Food and Drug Administration, or FDA, granted accelerated approval for our first medicine, Oxbryta
®
(voxelotor) tablets for the treatment of SCD in adults and children 12 years of age and older. Oxbryta, an oral therapy taken once daily, is the first
FDA-approved
treatment that directly inhibits sickle hemoglobin, or HbS, polymerization, the root cause of SCD.
By early December 2019, we began to make Oxbryta available to patients through our specialty pharmacy partner network. In addition, we established GBT Source Solutions
®
, a comprehensive program for patients who are prescribed Oxbryta that provides a wide range of practical, educational and financial support customized to each patient’s needs. In addition, we have focused on securing reimbursement and expanding patient access. By the end of September 2020, one quarter ahead of our goal, we secured broad Oxbryta reimbursement coverage for 90% of lives covered by payers either through published policies or verified patient adjudication. We also secured
fee-for-service
Medicaid coverage in 44 states, including all 17 priority states where most SCD patients in the United States live.
We have a number of ongoing clinical trials of Oxbryta. The Phase 2a HOPE-KIDS 1 Study, an open-label, single- and multiple-dose trial, is evaluating the safety, tolerability, pharmacokinetics and exploratory treatment effect of Oxbryta in pediatric patients aged 4 to 17 years with SCD. The Phase 3 HOPE-KIDS 2 Study, a post-approval confirmatory study we initiated in December 2019 as a condition of the accelerated approval of Oxbryta in the United States, uses transcranial Doppler, or TCD, flow velocity to seek to demonstrate a decrease in stroke risk in children 2 to 15 years of age. The ActIVe Phase 4 study, a pilot, open-label,
single-arm
study, aims to evaluate the effect of Oxbryta on exercise capacity, as measured by cardiopulmonary exercise testing (CPET) in patients 12 years of age and older with SCD. We are also conducting and expect to conduct additional clinical studies of Oxbryta, including to seek to expand the potential approved product label into younger pediatric populations as well as to study further the efficacy and safety profile of Oxbryta for SCD patients.
In January 2021, the European Medicines Agency, or EMA, accepted for review our Marketing Authorization Application, or MAA, seeking full marketing authorization of Oxbryta to treat hemolytic anemia (which is low hemoglobin due to red blood cell destruction) in SCD patients ages 12 years and older, and the MAA is undergoing standard review by the EMA. In addition, we plan to submit by
mid-2021
a supplemental New Drug Application, or sNDA, to expand the current Oxbryta label to include treatment of
 
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6

 
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SCD in children ages 4 to 11 years, under the FDA’s accelerated approval pathway. Thereafter, we also plan to submit a New Drug Application, or NDA, for a new
age-appropriate
formulation for this patient population. To provide early access prior to potentially receiving additional marketing approval, we have established an expanded access protocol for eligible SCD patients in the United States and an early access program for eligible SCD patients for outside the United States. In addition, we have entered into an exclusive agreement with Biopharma-Middle East and Africa, or
Biopharma-MEA,
to distribute Oxbryta in the six countries that make up the GCC region (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates), where the U.S. approval of Oxbryta can be referenced to allow for access to the medicine while health authorities conduct their reviews.
Beyond Oxbryta, we are engaged in other research and development activities, including clinical programs to potentially develop next-generation treatments for SCD, including inclacumab, a
P-selectin
inhibitor, which is a clinically validated target in SCD, known to reduce the incidence of vaso-occlusive crises, or VOCs, and our next generation hemoglobin polymerization inhibitor, GBT021601, or GBT601. We are also engaged in additional preclinical research activities working on new targets.
As part of our efforts to build our pipeline, we regularly evaluate opportunities to
in-license,
acquire or invest in new business, technology or assets or engage in related discussions with other business entities.
We licensed inclacumab from F.
 
Hoffmann-La
 
Roche Ltd. and
 
Hoffmann-La
 
Roche Inc. (together, “Roche”) under the License Agreement we entered into in August 2018, or Roche Agreement. Prior to licensing inclacumab to us, Roche conducted clinical studies that enrolled more than 700
 
non-SCD
 
patients and demonstrated an encouraging pharmacokinetic, safety, and tolerability profile for inclacumab. We expect to be able to leverage the safety data from Roche’s prior clinical studies, as we proceed with our development of inclacumab as a potential treatment to reduce the frequency of VOCs in patients with SCD and to reduce the hospital VOC readmission rate for patients that require inpatient treatment for an initial VOC episode. We expect to initiate two pivotal Phase 3 clinical trials by mid-2021. One study will be a chronic prevention study with an endpoint of the reduction in VOCs over a
 
48-week
 
treatment period, and the other study will focus on hospital readmissions with an endpoint of the reduction of the rate of readmission to hospitals for VOC within 90 days following an initial hospitalization for VOC.

We also have an ongoing early-stage collaboration with Syros Pharmaceuticals, Inc., or Syros, under a License and Collaboration Agreement, or Syros Agreement, entered into in December 2019, to discover, develop and commercialize novel therapies for SCD and beta thalassemia. We are currently exploring orally available, small molecule drugs designed to upregulate fetal hemoglobin. Under the Syros Agreement, we have an option to obtain an exclusive worldwide license to develop, manufacture and commercialize any compounds or products resulting from the collaboration, subject to Syros’ option to
co-promote
the first product in the United States.
In addition, we entered into a License Agreement with Sanofi in March 2021, under which we received an exclusive license under certain intellectual property controlled by Sanofi to use, develop, manufacture, commercialize and otherwise exploit certain compounds, including compounds directed against or that modulate one of two specified targets, or Licensed Compounds, for the treatment of human diseases worldwide. We currently intend to explore the Licensed Compounds for the potential treatment of SCD, and we believe the mechanisms are distinct and potentially complementary to that of Oxbryta.
In March 2020, the Centers for Disease Control and Prevention, or CDC, declared a global pandemic related to
SARS-CoV-2,
the virus that causes coronavirus disease 2019, or
COVID-19,
and the pandemic has impacted our business, including our commercialization of Oxbryta and our research and development activities. For example, we implemented a temporary work from home policy; temporarily suspended our field team from most
in-person
interactions, including visits to physician offices, clinics and hospitals as well as
in-person
meetings with payors; and temporarily delayed or paused certain research and development activities, including screening and enrollment in all clinical studies sponsored by us. As we continue to monitor and work toward resumption of all trial activities, we are continuing with administrative trial-start up activities (such as contracting and IRB/EC approvals). Notably, the
COVID-19
pandemic has not significantly impacted our supply of Oxbryta. We continue to believe we have an adequate supply of Oxbryta to sustain estimated patient need through 2021, and we are continuing to produce Oxbryta tablets.
We have seen a significant decrease in weekly new patient prescriptions for Oxbryta from a peak in early March 2020, and we expect the rate of new patient prescriptions may remain lower depending on the course of the pandemic. While we intend to resume normal operations as soon as practicable, we do not know for certain the extent or duration of these and other disruptions or the long-term impact on our business. Since
mid-March
2020, when we made the decision to temporarily suspend
in-person
visits to healthcare professionals, or HCPs, by our field teams, we have been engaging with HCPs and payors through increased use of digital and internet-based education and outreach, and we have more recently increased our
face-to-face
engagements in some settings following appropriate
COVID-19
protocols.
 
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Table of Contents
We are not profitable and have incurred losses and negative cash flows from operations each year since our inception. Our net losses were $74.9 million and $73.0 million for the three months ended March 31, 2021, and 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $1.06 billion. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations. We had $445.3 million in cash and cash equivalents and $36.7 million in marketable securities as of March 31, 2021.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies and estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.
Results of Operations
Comparison of the Three Months Ended March 31, 2021 and 2020
 
    
Three Months Ended
March 31,
    
$ Change
    
% Change
 
    
2021
    
2020
 
    
(in thousands, except percentages)
 
Product sales, net
   $ 39,043      $ 14,118      $ 24,925        177
Costs and operating expenses:
                                   
Cost of sales
     584        135        449        333
Research and development
     50,857        39,773        11,084        28
Selling, general and administrative
     58,966        47,662        11,304        24
    
 
 
    
 
 
    
 
 
          
Total costs and operating expenses
     110,407        87,570        22,837        26
    
 
 
    
 
 
    
 
 
          
Loss from operations
     (71,364      (73,452      2,088        (3 )% 
Interest income
     329        2,856        (2,527      (88 )% 
Interest expenses
     (3,689      (2,314      (1,375      59
Other expenses, net
     (206      (116      (90      78
    
 
 
    
 
 
    
 
 
          
Net loss
   $ (74,930    $ (73,026    $ (1,904      3
    
 
 
    
 
 
    
 
 
          
Product sales, net
Product sales, net was $39.0 million and $14.1 million for the three months ended March 31, 2021, and 2020, respectively. Product sales consist of sales of our only product, Oxbryta, which has been approved by the FDA. The only performance obligation included in our contracts is the delivery of Oxbryta to our customers, which are a limited number of specialty pharmacies and a specialty distributor, or collectively, Customers. Therefore, no allocation of transaction price among performance obligations is necessary. Consequently, the transaction price determined after considering the impacts of variable consideration is recognized at the time control is transferred to our Customers, which is upon delivery of Oxbryta to our Customers.
Because all sales of Oxbryta have been in the United States and because our Customers have similar variable consideration impacts, we provide revenue numbers on a total basis without further disaggregation. Additionally, we do not have any contract assets or liabilities, other than accounts receivable, related to our sales of Oxbryta. We expect our product revenue to increase year over year as we increase the number of patients on Oxbryta.
 
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Table of Contents
The following table summarizes activity with respect to our sales allowances and accruals for the period ended March 31, 2020 (in thousands):
 
    
Rebates, co-payment

assistance, Medicare
Part D coverage gap,
product returns and
distributor fees
    
Prompt payment
discounts and
chargebacks
    
Total
 
Balances at December 31, 2020
   $ 6,405      $ 751      $ 7,156  
Provision related to current period sales
     5,236        1,477        6,713  
Credit or payments made during the period
     (4,631      (1,487      (6,118
  
 
 
    
 
 
    
 
 
 
Balance at March 31, 2021
  
$
7,010
 
  
$
741
 
  
$
7,751
 
  
 
 
    
 
 
    
 
 
 
Cost of sales
Cost of sales of $584,000 and $135,000 for the three months ended March 31, 2021, and 2020, respectively, is related to manufacturing costs incurred after FDA approval for the cost of Oxbryta sold. Prior to receiving FDA approval for Oxbryta in November 2019, we recorded all costs incurred in the manufacture of Oxbryta as research and development expense. We expect to sell inventory previously expensed to research and development over approximately the current year, and, accordingly, we expect our costs of product sales of Oxbryta to increase as a percentage of net sales in future periods as we produce and sell inventory that reflects the full cost of manufacturing the product.
Research and development
Research and development expenses consist primarily of costs incurred for the development of Oxbryta and product candidates, which include:
 
   
employee-related expenses, which include salaries, benefits and stock-based compensation;
 
   
expenses incurred under agreements with consultants, third-party research and manufacturing organizations, and investigative clinical trial sites that conduct research and development activities on our behalf;
 
   
the costs related to production of clinical supplies, including fees paid to contract manufacturers;
 
   
laboratory and vendor expenses related to the execution of nonclinical studies and clinical trials;
 
   
payments upon achievement of certain clinical development and regulatory milestones pursuant to license agreements; and
 
   
facilities and other allocated expenses, which include expenses for rent and maintenance of facilities, depreciation and amortization expense and other supplies.
We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and clinical sites. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and the services are performed.
The largest component of our total operating expenses is our investment in research and development activities, including the clinical development of Oxbryta. We allocate research and development salaries, benefits, stock-based compensation and indirect costs to Oxbryta, inclacumab and other product candidates that we may pursue on a program-specific basis.
We expect our research and development expenses will increase in future periods as we continue to invest in research and development activities related to developing Oxbryta and product candidates, and as programs advance into later stages of development and we begin to conduct additional or larger clinical trials. The process of conducting the necessary clinical research to obtain, expand the scope of, and maintain regulatory approval is costly and time-consuming, and research and development is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.
 
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Table of Contents
The following table summarizes our research and development expenses incurred during the respective periods (in thousands, except percentages):
 
    
Three Months Ended March 31,
    
$ Change
    
% Change
 
    
2021
    
2020
 
Costs incurred by development program:
           
Oxbryta for the treatment of SCD
   $ 23,462      $ 23,460      $ 2       
Other preclinical programs
     17,274        9,316        7,958        85
Inclacumab for the treatment of SCD
     10,120        6,997        3,123        45
  
 
 
    
 
 
    
 
 
    
Total research and development expenses
   $ 50,857      $ 39,773      $ 11,084        28
  
 
 
    
 
 
    
 
 
    
 
*
Change is not meaningful
Research and development, or R&D, expenses increased by $11.1 million, or 28%, to $50.9 million for the three months ended March 31, 2021 from $39.8 million for the three months ended March 31, 2020. The increase was primarily due to an increase of $8.0 million in external costs related to our preclinical research and development programs, including a $2.25 million upfront payment related to the Sanofi License Agreement, which we entered into in March 2021. In addition, there was an increase of $3.1 million in external costs related to our inclacumab program. R&D related stock-based compensation expense was $4.9 million for the three months ended March 31, 2021 and $5.4 million for the three months ended March 31, 2020. The decrease of R&D related stock-based compensation expense was primarily due to increase in amount capitalized for inventory.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of costs incurred in our executive, commercial, finance, corporate development, human resource, information technology, legal, compliance and other general and administrative functions, which include:
 
   
employee-related expenses, which include salaries, benefits and stock-based compensation;
 
   
fees to third-party vendors providing customer support services;
 
   
expenses incurred under agreements with consultants; and
 
   
facilities and other allocated expenses, which include expenses for rent and maintenance of facilities, depreciation and amortization expense and other supplies.
We expense all selling, general and administrative costs in the periods in which they are incurred. We expect our general and administrative expenses to continue to grow as we progress through this early stage of the commercialization of Oxbryta.
Selling, general and administrative, or SG&A, expenses increased by $11.3 million or 24%, to $59.0 million for the three months ended March 31, 2021 from $47.7 million for the three months ended March 31, 2020. The increase was primarily due to an increase of $6.4 million in salary and benefit costs due to higher headcount and $4.9 million in professional and consulting services due to increases in medical affairs related activities and marketing expense related to Oxbryta. SG&A related stock-based compensation expense was $15.1 million for the three months ended March 31, 2021 and $11.0 million for the three months ended March 31, 2020.
Liquidity, Capital Resources and Plan of Operations
We are not profitable and have incurred losses and negative cash flows from operations each year since our inception. We have financed our operations primarily through sales of equity securities, and to a lesser extent, through debt financing. As of March 31, 2021, we had $445.3 million in cash and cash equivalents and $36.7 million in marketable securities. On December 17, 2019, we entered into the Loan Agreement, or Term Loan, with funds managed by Pharmakon Advisors LP, which are BioPharma Credit PLC, as collateral agent, Biopharma Credit Investments V (Master) LP, as a lender, and BPCR Limited Partnership, as a lender, and collectively, the Lenders, for a senior secured credit facility consisting of an initial tranche of $75.0 million and the option to draw an additional $75.0 million until December 31, 2020. As of March 31, 2021, $150.0 million was outstanding under the Term Loan. The Term Loan repayment schedule provides for interest only payments for the first 39 months, followed by consecutive equal quarterly payments of principal and interest commencing in March 2023 and continuing through the maturity of December 2025.
 
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On August 5, 2020, we filed a shelf registration statement on Form
S-3,
or Shelf Registration Statement, with the SEC relating to the registration of our common stock, preferred stock, debt securities, warrants and units or any combination thereof. Concurrently with the filing of the Shelf Registration Statement, we entered into a Sales Agreement with SVB Leerink LLC, or the Sales Agent, to provide for the offering, issuance and sale by us of up to an aggregate of $200.0 million of our common stock from time to time in
“at-the-market”
offerings under the Shelf Registration Statement, or Sales Agreement. We have agreed to pay to the Sales Agent cash commissions of up to 3.0% of the gross proceeds from sales of common stock pursuant to the Sales Agreement. We have not issued any shares or received any proceeds pursuant to the Sales Agreement through March 31, 2021.
Our primary use of cash is to fund operations. Cash used to fund operations is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
We believe that our existing capital resources will be sufficient to fund our planned operations for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. In the longer term, we believe we may continue to require additional financing to commercialize Oxbryta in the United States and other territories, to conduct additional clinical trials of Oxbryta, to develop our product candidates, to acquire complementary technology, assets or product candidates and to fund our operations. We may continue to seek funds through equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. Our future funding requirements will depend on many factors, including:
 
   
our ability to successfully commercialize Oxbryta, inclacumab and any other product candidates we may identify and develop in the United States or any other territories;
 
   
the manufacturing, selling, and marketing costs associated with the commercialization of Oxbryta and the potential commercialization of inclacumab and any other product candidates we may identify and develop, including the cost and timing of establishing or maintaining our sales and marketing capabilities in any territory(ies);
 
   
the amount and timing of sales and other revenues from Oxbryta, inclacumab and any other product candidates we may identify and develop, including the sales price and the availability of adequate third-party reimbursement;
 
   
the time and cost necessary to conduct and complete multiple ongoing studies (including our HOPE-KIDS 1 Study, our Phase 3 HOPE-KIDS 2 Study, and other studies);
 
   
the time and cost necessary to conduct and complete any additional clinical studies required to pursue additional regulatory approvals for Oxbryta for SCD, including our Phase 3 HOPE-KIDS 2 Study (which is intended as our required confirmatory study to move from our current Subpart H approval to a full approval of Oxbryta) and any studies to support potential label expansions into younger SCD pediatric populations, or any other post-marketing studies for Oxbryta for SCD;
 
   
the progress, data and results of clinical trials of Oxbryta and our product candidates;
 
   
the progress, timing, scope and costs of our nonclinical studies, our clinical trials and other related activities, including our ability to enroll subjects in a timely manner for our ongoing and future clinical trials of Oxbryta, inclacumab or any other product candidate that we may identify and develop;
 
   
the costs of obtaining clinical and commercial supplies of Oxbryta, inclacumab and any other product candidates we may identify and develop;
 
   
our ability to advance our development programs, including for Oxbryta, inclacumab and any other potential product candidate programs we may identify and pursue, the timing and scope of these development activities, and the availability of approval for any of our other product candidates;
 
   
our ability to successfully obtain any additional regulatory approvals from any regulatory authorities, and the scope of any such regulatory approvals, to market and sell Oxbryta, inclacumab and any other product candidates we may identify and develop in any territory(ies);
 
   
the cash requirements of any future acquisitions or discovery of product candidates;
 
   
the time and cost necessary to respond to technological and market developments;
 
   
the extent to which we may acquire or
in-license
other product candidates and technologies, and the costs and timing associated with any such acquisitions or
in-licenses;
 
   
our ability to attract, hire, and retain qualified personnel; and
 
   
the costs of maintaining, expanding, and protecting our intellectual property portfolio.
 
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Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for commercialization, clinical trials and other research and development expenditures. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of Oxbryta and product candidates and ongoing developments in connection with the
COVID-19
pandemic, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated commercialization, clinical trials and research and development activities.
The following table summarizes our cash flows for the periods indicated (in thousands):
 
    
Three Months Ended
March 31,
 
    
2021
    
2020
 
Cash used in operating activities
   $ (79,256    $ (78,622
Cash provided by investing activities
     28,004        91,126  
Cash provided by financing activities
     1,780        784  
  
 
 
    
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
   $ (49,472    $ 13,288  
  
 
 
    
 
 
 
Cash flows from operating activities
Cash used in operating activities for the three months ended March 31, 2021, was $79.3 million, consisting of a net loss of $74.9 million, which was partially offset by
non-cash
charges of $19.9 million for stock-based compensation, $1.5 million for net depreciation and amortization expense, and $0.2 million for
non-cash
interest expense. The change in our net operating assets and liabilities was due primarily to a decrease of $9.3 million in accrued compensation primarily due to the payment of annual employee bonuses, a decrease of $8.5 million in accounts payable due to timing of payments and receipt of invoices, a decrease of $2.9 million in accrued liabilities due to timing of services performed, an increase of $2.0 million in prepaid expenses and other current assets, an increase of $1.6 million in inventories and a decrease of $1.1 million in operating lease liabilities due to payments made during the period.
Cash used in operating activities for the three months ended March 31, 2020, was $78.6 million, consisting of a net loss of $73.0 million, which was partially offset by
non-cash
charges of $16.4 million for stock-based compensation and $3.2 million for net depreciation and amortization expense. The change in our net operating assets and liabilities was due primarily to an increase of $13.2 million in inventories as we began capitalizing manufacturing of Oxbryta as inventory upon receipt of FDA approval in November 2019, a decrease of $6.8 million in accrued liabilities due to timing of services performed, a decrease of $6.3 million in accrued compensation primarily due to the payment of annual employee bonuses, an increase of $2.6 million in accounts payable due to timing of payments and receipt of invoices, and an increase in accounts receivable of $1.9 million due to timing of cash receipts associated with Oxbryta commercial sales.
Cash flows from investing activities
Cash provided by investing activities for the three months ended March 31, 2021, was $28.0 million, consisting of maturities of marketable securities of $29.1 million, which was offset by purchases of property and equipment of $1.1 million.
Cash provided by investing activities for the three months ended March 31, 2020, was $91.1 million, consisting of purchases of marketable securities of $58.0 million and purchases of property and equipment of $2.5 million, which were partially offset by maturities of marketable securities of $151.6 million.
Cash flows from financing activities
Cash provided by financing activities for the three months ended March 31, 2021, was $1.8 million, primarily from proceeds of $3.7 million from the issuance of common stock to participants in the employee stock purchase plan and exercise of stock options, which were partially offset by $1.9 million in taxes paid related to net share settlement of equity awards.
Cash provided by financing activities for the three months ended March 31, 2020, was $0.8 million, primarily from proceeds of $3.0 million from the issuance of common stock to participants in the employee stock purchase plan and exercise of stock options, which were partially offset by $2.1 million in taxes paid related to net share settlement of equity awards.
 
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Off-Balance
Sheet Arrangements
As of March 31, 2021, we had no
off-balance
sheet arrangements as defined in Item 303(a)(4) of Regulation
S-K
as promulgated by the SEC.
Contractual Obligations and Other Commitments
As of the date of this report, there were no material changes to our contractual obligations and commitments outside the ordinary course of business during the three months ended March 31, 2021, as compared to those disclosed in our Annual Report on Form
10-K
for the year ended December 31, 2020.
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk

Our market risks as of March 31, 2021 have not changed materially from those discussed in Item 7A of our Annual Report on
 
Form 10-K
 
for the year ended December 31, 2020.
Item 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule
13a-15(b)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act) as of March 31, 2021. Based on the evaluation of our disclosure controls and procedures as of March 31, 2021, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting (as defined in Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act) during the three months ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
 
Item 1.
Legal Proceedings
We are not currently a party to any material litigation or other material legal proceedings.
 
Item 1A.
Risk Factors
SUMMARY OF RISK FACTORS
Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form
10-Q
and our other filings with the Securities and Exchange Commission, or SEC, before making investment decisions regarding our common stock.
 
   
Our business is substantially dependent on our ability to successfully commercialize our first approved product, Oxbryta, which will depend upon the degree of market acceptance by the medical community and marketplace.
 
   
If our sales and marketing capabilities for Oxbryta or any future product candidate for which we receive regulatory approval are not effective, we may not succeed in our commercialization efforts.
 
   
Our profitability depends on our ability to sell sufficient amounts of product at competitive prices and on the availability of adequate coverage and reimbursement through governmental or private third-party payors, the status of which is subject to significant uncertainty.
 
   
Our future growth may depend on our ability to penetrate foreign markets, which would subject us to additional regulatory burdens and other risks and uncertainties.
 
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We will be subject to ongoing regulatory obligations and scrutiny for Oxbryta and any other product candidate for which we receive approval, which may include restrictions on product labeling, distribution or other post-marketing activities.
 
   
Our business operations and relationships with third parties are subject to various laws and regulations, and any failure to comply with such laws and regulations could adversely affect our business.
 
   
We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that render our only approved product, Oxbryta, or product candidates uneconomical or obsolete, which could adversely affect our development programs, commercialization activities and financial condition.
 
   
If the market for Oxbryta or our product candidates is smaller than expected, our business and financial condition may be adversely affected.
 
   
We have a limited operating history, with only one drug approved for marketing, and expect to continue to incur losses for the foreseeable future.
 
   
We may require substantial additional funds to achieve our business goals, and any inability to obtain such funds may force us to delay, limit or terminate our commercialization of Oxbryta or our other product development efforts and operations.
 
   
We are party to a loan and security agreement that contains operating covenants and obligations that may restrict our business and financing activities.
 
   
If we are unable to obtain regulatory approval in additional jurisdictions for Oxbryta or in any jurisdictions for other product candidates, our business will be substantially harmed.
 
   
All of our programs other than Oxbryta are still in earlier development stages, so we remain very reliant on the potential success of Oxbryta in the clinic and in the marketplace.
 
   
Expedited development and regulatory approval programs for Oxbryta or other product candidates may not lead to a faster development or regulatory review or approval process, or to a timely approval, if at all.
 
   
The development of Oxbryta represents a novel therapeutic approach, and the outcomes of our clinical trials may not support any label expansion or any decision to seek, grant or maintain any regulatory approval.
 
   
Results of earlier studies may not be predictive of future clinical trial results, and initial studies may not establish or maintain an adequate safety or efficacy profile for Oxbryta or a product candidate to justify proceeding to advanced clinical trials or an application for regulatory approval.
 
   
We may encounter substantial delays in conducting or completing our clinical trials, including due to difficulties in enrolling patients or maintaining compliance with trial protocols, or the occurrence of serious adverse events or unacceptable side effects.
 
   
We may not realize the expected benefits of the orphan drug designations we have received for Oxbryta, and we may not receive orphan drug designation for any product candidate.
 
   
If the third parties upon which we rely to conduct our clinical trials, nonclinical studies, manufacturing and other activities related to the development and commercialization of Oxbryta and our product candidates fail to meet regulatory requirements or otherwise do not perform in a satisfactory manner, our business will be harmed.
 
   
If we or our licensors are unable to obtain and maintain intellectual property protection that is adequate in scope and duration for Oxbryta or our product candidates, our ability to successfully commercialize Oxbryta and other product candidates will be impaired.
 
   
We may become subject to litigation, claims and investigations, including healthcare compliance claims, product liability claims or claims alleging infringement of third parties’ proprietary rights and/or seeking to invalidate our patents, which would be costly and could impair our development and commercialization efforts.
 
   
If we are unable to protect the confidentiality of our trade secrets or other confidential information, our business would be harmed.
 
   
The
COVID-19
pandemic has adversely impacted, and may continue to adversely impact, our business, including our commercialization activities, clinical trials and preclinical studies.
 
   
Our success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel, including an adequate sales force, as well as managing our growth.
 
   
If we are not successful in discovering, developing, acquiring or commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives could be impaired.
 
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Any collaboration, license, distribution or other arrangements that we are a party to or may enter into in the future may not be successful.
 
   
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict.
 
   
We do not currently intend to pay dividends on our common stock, and, consequently, our stockholders’ ability to achieve a return on their investment will depend on appreciation in the price of our common stock.
RISK FACTORS
This Quarterly Report on Form
10-Q
contains forward-looking information based on our current expectations. Because our business is subject to many risks and our actual results may differ materially from any forward-looking statements made by or on behalf of us, this section includes a discussion of important factors that could affect our business, operating results, financial condition and the trading price of our common stock. This discussion should be read in conjunction with our condensed consolidated financial statements as of March 31, 2021, and consolidated financial statements as of December 31, 2020, and the notes accompanying those consolidated financial statements.
Risks Related to Commercialization
Our business is substantially dependent on our ability to successfully commercialize Oxbryta, and the commercial success of Oxbryta or any future drug we may develop or obtain will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community and marketplace.
Our business depends heavily on our ability to successfully commercialize our first approved product, Oxbryta, for the treatment of sickle cell disease, or SCD. Oxbryta or any future drug of ours approved for commercial sale may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community and marketplace. If Oxbryta or any other approved drug does not achieve an adequate level of acceptance, we may not generate significant revenue from drug sales and we may not become profitable. Before granting reimbursement approval, healthcare payors may require us to demonstrate that the drug, in addition to treating the target indication, also provides incremental health benefits to patients. For example, there have been numerous instances of government and private payors placing restrictions on coverage for products approved by the U.S. Food and Drug Administration, or FDA, under the FDA’s Subpart H regulations, or Subpart H. Our efforts to educate the medical community and third-party payors about the benefits of Oxbryta or any future drug approved for commercial sale will require significant resources and may never be successful. The degree of market acceptance of Oxbryta and any other approved drugs that we may pursue will depend on a wide range of factors, including:
 
   
the demonstrated efficacy and potential advantages of our drugs compared to alternative treatments;
 
   
our ability to offer our drugs for sale at competitive prices;
 
   
the availability of third-party coverage and adequate reimbursement;
 
   
the convenience and ease of administration of our drugs compared to alternative current and future treatments;
 
   
the willingness of the SCD or other target patient populations to try new therapies and of physicians to prescribe these therapies;
 
   
the availability of our drugs and our ability to meet market demand, including a reliable supply for long-term chronic treatment;
 
   
the strength of labeling, marketing and distribution support;
 
   
the clinical indications and approved labeling for which the drug is approved, including labeling restrictions for drugs approved under Subpart H, such as Oxbryta;
 
   
the prevalence and severity of any side effects and overall safety profile of the drug; and
 
   
any restrictions on the use of the drug, including together with other medications.
For example, shortly after we launched Oxbryta, the outbreak of the novel coronavirus,
SARS-CoV-2,
which causes coronavirus disease 2019
(COVID-19),
evolved into a global pandemic that has significantly impacted people and entities throughout the world. In light of the
COVID-19
pandemic, we temporarily suspended our field team from most
in-person
interactions, including visits to physician offices, clinics and hospitals as well as
in-person
meetings with payors. While we have more recently increased our
face-to-face
engagements in some settings following appropriate
COVID-19
protocols, we are still utilizing digital and internet-based education and outreach to a greater extent than prior to the pandemic. The
COVID-19
pandemic has also reduced our ability to engage
 
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with the medical and investor communities. These and other measures have impacted our ability to commercialize Oxbryta and may significantly impact our business in general, and we may continue to experience disruptions to our commercial efforts as well as other disruptions that could materially impact our business.
If our sales and marketing capabilities for Oxbryta in the United States are not effective, or we are unable to establish or secure effective sales and marketing capabilities for any future drug approved for commercial sale in the United States or another geographic market, we may be unsuccessful in our commercial efforts.
In 2019, we established the infrastructure we believed was adequate for the commercial launch of Oxbryta in the United States, which occurred in December 2019. This included establishing a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize Oxbryta in the United States. Our commercialization of Oxbryta in the United States will continue to be expensive, difficult, risky and time consuming, and we may not deploy or have adequate resources over time to support the successful commercialization of Oxbryta. Any failures or delays in our commercial efforts, including with respect to any changes in related resources or activities following launch, could adversely impact the commercialization of Oxbryta or any other products, if any are approved.
Although many of our employees have experience with commercializing products while employed at other companies, our 2019 launch of Oxbryta is our first experience marketing and selling a drug together as a management team. To successfully commercialize Oxbryta or any other drugs we may develop or obtain, we will need to continue to develop and strengthen our commercial capabilities, either on our own or with others. Our initial estimate of the size of the required sales force may be materially more or less than the size of the sales force actually required to effectively commercialize Oxbryta or any other product candidates, if any. For example, we may have hired substantially more sales representatives than required and may incur excess costs as a result.
In light of the
COVID-19
pandemic, we temporarily suspended our field team from most
in-person
interactions, including visits to physician offices, clinics and hospitals as well as
in-person
meetings with payors. While we have more recently increased our
face-to-face
engagements and are continuing to engage with healthcare professionals and payors through digital and internet-based education and outreach, the impact of utilizing less
in-person
interactions is unknown, although we believe this may have impacted new patient prescriptions for Oxbryta. We have seen a significant decrease in weekly new patient prescriptions for Oxbryta from a peak in early March 2020, and we expect the rate of new patient prescriptions may remain lower, depending on the course of the pandemic.
Another potential challenge for our commercial efforts is frequency of doctor visits by SCD patients. We believe that nearly half of Medicaid and Medicare patients living with SCD do not see a hematologist at least once per year. This infrequency of doctor visits, which has been exacerbated during the
COVID-19
pandemic, may impede prescriptions for Oxbryta.
With respect to certain geographical markets, we may seek to enter into collaborations with other entities to utilize their local marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If our future collaborators do not commit sufficient resources to commercialize Oxbryta or future drugs, if any, and we are unable to develop the necessary sales and marketing capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We may also be competing with companies that currently have extensive and well-funded marketing and sales operations. For example, in November 2019, the FDA approved Novartis’ biologic, crizanlizumab, for the reduction of the frequency of vaso-occlusive crises, or VOCs, in patients with SCD, and, in October 2020, Novartis announced that the European Commission approved crizanlizumab for the prevention of recurrent VOCs in patients with SCD. Without an effective internal team or the support of a third party to perform marketing and sales functions, we would be unable to compete successfully against more established companies, and our commercial efforts and ability to generate revenues would be impaired.
Our profitability will depend significantly on our ability to sell sufficient amounts of product at competitive prices and on the availability of adequate coverage and reimbursement through governmental or private third-party payors. The insurance coverage and reimbursement status of newly approved products is uncertain in the United States and elsewhere, and failure to obtain or maintain adequate coverage and reimbursement for Oxbryta or any other products we may develop due to price controls, resource constraints or reimbursement limitations could limit our ability to market those products and impair our ability to generate revenue.
Our target patient populations are small, and, accordingly, the pricing, coverage and reimbursement of Oxbryta or any of our product candidates, if approved, must be adequate to support our commercial infrastructure. To achieve profitability, our
per-patient
prices must be sufficient to recover our development and manufacturing costs, and we must be able to sell sufficient amounts of product at these prices. Additionally, the availability of government funded or private insurance coverage for Oxbryta and any other product candidates for any approved indications, if any, and the extent of reimbursement by governmental and private payors, will be essential for most patients to be able to afford Oxbryta or any of our other specialty products, if approved. In particular, the list price
 
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for Oxbryta in the United States is $125,000 per year, and a significant percentage of patients with SCD in the United States rely on government programs, such as Medicare and Medicaid, for their coverage of drugs and other medical care, so the availability of federal and state coverage of Oxbryta is critical to the success of our commercialization efforts for Oxbryta in the United States. Sales of Oxbryta or any future drug we may develop or obtain will depend substantially, both domestically and abroad, on the extent to which the costs of such drugs will be paid by third party payors, like private health insurers, including health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, and government health administration programs. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize Oxbryta or any future drug we may develop or obtain. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved drug products, and even more uncertainty related to the insurance coverage for products, such as Oxbryta, that receive accelerated approval by the FDA under Subpart H (including in the period before required post-marketing confirmatory studies to verify clinical benefit). The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the reimbursement rate that the payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the
FDA-approved
products for a particular indication. Moreover, a third-party payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. For example, the payor’s reimbursement payment rate may not be adequate or may require
co-payments
that patients find unacceptably high. Additionally, coverage and reimbursement for products can differ significantly from payor to payor.
In the United States, significant decisions about reimbursement for new medicines are made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare, and federal and state programs enter into contracts with drug manufacturers for discounted drug prices for Medicare, VA/Federal Supply Schedule, 340B and Medicaid under the Medicaid Drug Rebate Program, among others. The practices and requirements relating to these arrangements are highly complex and subject to differing regulatory requirements and time frames, which will impact the commercialization of Oxbryta. For example, payment of rebates by drug manufacturers for Medicaid purchases are determined by each state, and in some cases, if a company does not enter into a rebate agreement, its Medicaid sales will be subjected to a “prior authorization” procedure that requires state agency approval to qualify a doctor’s prescription for reimbursement. Limitations could also come from entities such as local Medicare carriers, fiscal intermediaries, or Medicare Administrative Contractors. Further, Medicare Part D, which provides a pharmacy benefit to certain Medicare patients, does not require participating prescription drug plans to cover all drugs within a class of products. Our business could be materially adversely affected if private or governmental payors, including Medicare Part D prescription drug plans, were to limit access to, or deny or limit reimbursement of, Oxbryta or any of our product candidates, if approved.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the potential pricing and usage of Oxbryta and any future drugs we may develop or obtain. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems, and changes to these regulations over time contribute to uncertainty regarding the ability to obtain pricing and usage approvals for our product candidates outside of the United States. In addition, the prices of medicines under such systems are, in general, substantially lower than in the United States. Other countries allow companies to fix their own prices for medicines, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates outside of the United States. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.
In many
non-U.S.
jurisdictions, including some countries in the European Union, or EU, the proposed pricing for a drug must be approved before it may be lawfully marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted and reimbursement may in some cases be unavailable. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the product in that country. The requirements governing drug pricing vary widely from country to country and products may be subject to continuing governmental control following approval. For example, reimbursement in the EU must be negotiated on a
country-by-country
basis and, in many countries, the product cannot be commercially launched until reimbursement is approved. Furthermore, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use, including by approving a specific price for the medicinal product or adopting a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. In addition, to obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies, or to meet other criteria for pricing approval. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products or product candidates.
 
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Moreover, increasing efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and levels of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for Oxbryta or our product candidates. We expect to experience pricing pressures in connection with the sale of Oxbryta and any future drugs we may develop or obtain, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative and political changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. For example, third-party payors are increasingly requiring higher levels of evidence of the benefits and clinical outcomes of new technologies, benchmarking against other therapies, seeking performance-based discounts, and challenging the prices charged. We cannot be sure that coverage will be available for Oxbryta or any other product we commercialize and, if available, that the reimbursement rates will be adequate, as increasingly high barriers are being erected to the entry of new products. In addition, drug prices are under significant scrutiny in the markets in which our products are or may be sold, and drug pricing and other healthcare costs continue to be subject to intense political and social pressures that we anticipate will continue and escalate on a global basis.
Our future profitability will depend, in part, on our ability to commercialize and obtain reimbursement for Oxbryta and our product candidates in markets within and outside of the United States and Europe. If reimbursement for Oxbryta, or our product candidates, if approved, is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, in the United States or, based on the large population of patients with SCD who reside in foreign countries, abroad, our business and operations may be harmed, our stock price may be adversely impacted and experience periods of volatility, we may have difficulty raising funds and our results of operations may be adversely impacted.
Our future growth may depend, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.
Our current plans include the pursuit of commercialization for Oxbryta in Europe, the Gulf Cooperation Council, or GCC, region and Latin America. If we commercialize Oxbryta and any future drugs we may develop or obtain in foreign markets, we would be subject to additional risks and uncertainties, including:
 
   
the burden of complying with complex and changing foreign regulatory, tax, accounting, compliance and legal requirements;
 
   
different medical practices and customs in foreign countries affecting acceptance in the marketplace;
 
   
import or export licensing requirements;
 
   
longer accounts receivable collection times;
 
   
longer lead times for shipping;
 
   
language barriers for technical training;
 
   
reduced protection of intellectual property rights in some foreign countries, and related prevalence of bioequivalent or generic alternatives to therapeutics;
 
   
foreign currency exchange rate fluctuations;
 
   
potential resource constraints, including with respect to patients’ ability to obtain reimbursement for our products in foreign markets; and
 
   
the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.
Any of these factors could impair our ability to commercialize Oxbryta and any future drugs we may develop or obtain outside the United States, which could have a material adverse effect on our business and results of operations.
With the FDA approval of Oxbryta, and with respect to any other product candidate that receives regulatory approval in any jurisdiction, we will be subject to ongoing regulatory obligations and scrutiny, which may include significant restrictions relating to product labeling, distribution or other post-marketing requirements.
Even if a product candidate is approved, regulatory authorities may still impose significant restrictions on its indicated uses, approved labeling, distribution or marketing or may impose ongoing requirements for potentially costly post-marketing studies. For example, because the FDA approved Oxbryta under the accelerated approval pathway under Subpart H, we must conduct at least one
 
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post-marketing confirmatory study to verify clinical risk/benefit, which we intend to satisfy through our HOPE-KIDS 2 Study, and we may not be able to successfully and timely complete this study or any other post-marketing confirmatory study as required to maintain approval or achieve full approval. Also, the FDA has restricted the indicated use of Oxbryta under the approved label to patients 12 years and older. While we plan to conduct additional studies to potentially lower the indicated age range to 9 months of age, failure to reach agreement with the FDA on these studies, failure to obtain adequate results from them, or disagreements with regulatory authorities over the interpretation of the results may prevent expansion of the age range within our approved label.
Furthermore, any new legislation addressing drug safety or other drug related issues could result in delays or increased costs to assure compliance. With respect to Oxbryta and any other product candidate that is approved, at a minimum, they will each be subject to current standard ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information, including both federal and state requirements in the United States. In addition, regulatory agencies may not approve labeling claims that are necessary or desirable for the successful commercialization of Oxbryta, inclacumab or any other product candidates.
For example, the development of Oxbryta for the prophylactic treatment of SCD in pediatric patients is an important part of our current business strategy, and if we are unable to obtain regulatory approval for Oxbryta for the desired age ranges or other key labeling parameters, our business is likely to suffer.
In addition, manufacturers and their facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to current good manufacturing practices, or cGMPs. For Oxbryta, inclacumab and any other product candidates we may pursue, we are wholly reliant on third-party contract manufacturers for clinical as well as any commercial supplies of product candidates and products. As such, we and our contract manufacturers are subject to continual review and periodic inspections to assess compliance with cGMP requirements and must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control. We are also required to report certain adverse reactions and production problems, if any, to the FDA and comparable foreign regulatory authorities, and to comply with requirements concerning advertising and promotion for Oxbryta and any future products. In addition, we are subject to very rapid reporting obligations relating to any adverse events or serious adverse events relating to Oxbryta and our product candidates. Our failure to report adverse events we become aware of within the prescribed timeframes could have serious negative consequences for our commercialization, development programs, business and operations. In addition, any promotional communications or materials for prescription drugs are subject to a variety of complex legal and regulatory restrictions, including, but not limited to, consistency with the approved product’s approved label. Failure to obey these standard marketing requirements for Oxbryta or any other approved product, if any, could have serious negative consequences for our commercialization activities, business and operations.
If the FDA or any comparable foreign regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with a sponsor’s activities relating to the promotion, marketing or labeling of a product, these regulatory agencies may impose restrictions or sanctions on that product or us, including requiring withdrawal of the product from the market. In addition, in the United States, a wide range of commercialization and
pre-launch
activities relating to a drug candidate are subject to potential for significant civil and/or criminal liability and sanctions under federal anti-kickback and fraud and abuse statutes and regulations. If we fail to comply with any of these complex applicable regulatory requirements, a regulatory agency or enforcement authority may:
 
   
issue untitled or warning letters;
 
   
impose civil or criminal penalties;
 
   
impose injunctions;
 
   
impose fines;
 
   
impose additional specialized restrictions on the company’s activities and practices;
 
   
suspend regulatory approval;
 
   
suspend ongoing clinical trials;
 
   
seek voluntary product recalls and impose publicity requirements;
 
   
refuse to approve pending applications or supplements to approved applications submitted by us;
 
   
impose restrictions on our operations, including closing our contract manufacturers’ facilities; or
 
   
seize or detain products.
 
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As a company, we have limited experience with obtaining approval for, launching or commercializing any product candidates or products, or with complying with most of these complex ongoing regulatory requirements. It will continue to take significant effort and management attention to address compliance with these requirements with respect to Oxbryta in the United States and in any jurisdiction for which we seek to commercialize Oxbryta or any other product candidate, if approved. Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity even if significant liabilities do not result. Any failure to comply with these complex ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues from Oxbryta or to obtain approval for, launch, commercialize and generate revenues from inclacumab or any future product candidates. If we are subject to regulatory sanctions or if regulatory approval for our product candidates is withdrawn or limited, our business, prospects, financial condition and results of operations would be significantly harmed.
Our business operations and current and future relationships with investigators, health care professionals, consultants, third-party payors and customers are or will be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
Our current and future operations are or will be directly, or indirectly through our prescribers, customers and third-party payors, subject to various U.S. federal and state healthcare laws and regulations. These laws may impact, among other things, our current business operations, including our sales, marketing, distribution, commercialization, medical and educational programs and our clinical research activities, and they may constrain our business and financial arrangements and relationships with healthcare providers, physicians and other parties through which we market, sell and distribute Oxbryta and any future drugs we may develop or obtain. We may also be subject to additional healthcare, statutory and regulatory requirements and enforcement by foreign regulatory authorities in jurisdictions in which we conduct our business. The laws that may affect our ability to operate include the federal Anti-Kickback Statute, the federal False Claims laws, the U.S. Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, the Physician Payment Sunshine Act, and analogous state laws and regulations such as state anti-kickback and false claims laws and analogous
non-U.S.
fraud and abuse laws and regulations, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by
non-governmental
third-party payors.
Ensuring that our business activities (including our operations and arrangements with third parties) comply with applicable healthcare laws and regulations is complex, time-consuming, costly and could materially impact our operations. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse, price reporting or other healthcare laws and regulations.
Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these requirements, these risks cannot be entirely eliminated. Moreover, achieving and sustaining compliance with applicable federal, state and foreign privacy, security, and fraud requirements is costly. Any action against us for violation of these requirements, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from our business and operations, and could negatively impact the price of our common stock.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform and other factors. Federal and state enforcement bodies in the United States regularly pursue a large number of investigations, prosecutions, convictions and settlements in the healthcare industry, and in the EU, enforcement of the General Data Protection Regulation 2016/679, known as GDPR, is increasing. Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion of products or individuals from U.S. government funded healthcare programs, such as Medicare and Medicaid, or similar programs in other countries or jurisdictions, disgorgement, individual imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of
non-compliance
with these laws, contractual damages, reputational harm, diminished profits, and the curtailment or restructuring of our operations. Further, defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. If any of the physicians or other providers or entities with whom we expect to do business is found to not be in compliance with applicable requirements, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment. If any of the above occur, it could adversely affect our ability to operate our business and our results of operations.
 
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Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.
In the United States, there have been and continue to be a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could restrict or regulate post-approval activities, affect our ability to profitably sell Oxbryta and any other drug candidates for which we obtain marketing approval, and prevent or delay marketing approval of our drug candidates. For example, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Affordable Care Act or ACA, was passed, which substantially changes the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. Since its enactment, there have been many judicial, executive and legislative challenges to numerous aspects of the ACA. The full impact on our business of the ACA, the potential impacts of any challenges, including any laws repealing and/or replacing elements of it, as well as the political uncertainty surrounding any repeal or replacement legislation, remain unclear.
Additionally, at the federal level, statutes and regulations routinely impact a variety of parameters relating to federal programs and Medicaid. For example, CMS’s final rule regarding the Medicaid drug rebate program, issued in 2016, revised the manner in which the “average manufacturer price” is to be calculated by manufacturers participating in the program. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. The full impact of these federal and state laws and regulations, as well as other new laws and reform measures that may be proposed and adopted in the future, remains uncertain, but may result in additional reductions in Medicaid and other health care funding, or higher production costs which could have a material adverse effect on our customers and, accordingly, our financial operations.
There have been multiple recent U.S. congressional inquiries and proposed and adopted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs and biologics. In addition, Congress and multiple presidential administrations have indicated that they will continue to seek new legislative and/or administrative measures to control drug costs.
At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for Oxbryta and our drug candidates, once approved, or put pressure on our product pricing over time.
Moreover, there have been a number of other legislative and regulatory changes in recent years aimed at the biopharmaceutical industry. For instance, the Drug Quality and Security Act imposes obligations on manufacturers of biopharmaceutical products related to product tracking and tracing. Among the requirements of this legislation, manufacturers are required to provide certain information regarding the product to individuals and entities to which product ownership is transferred, will be required to label products with a product identifier, and are required keep certain records regarding the product. The transfer of information to subsequent product owners by manufacturers will eventually be required to be done electronically. Manufacturers are also required to verify that purchasers of the manufacturers’ products are appropriately licensed. Further, manufacturers have product investigation, quarantine, disposition, and FDA and trading partner notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products that would result in serious adverse health consequences or death to humans, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.
We expect federal and state healthcare reform measures that may be adopted in the future in the United States may result in more rigorous coverage criteria, increased regulatory burdens and operating costs, decreased net revenue from our pharmaceutical products and additional downward pressure on the price that we receive for Oxbryta and any of our drug candidates approved for use. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products. These legislative and executive efforts have significantly increased uncertainty regarding the availability of healthcare programs, insurance coverage and reimbursement as a general matter as well as for Oxbryta and our product candidates, and we cannot predict how these events will impact our business or operations. Accordingly, at this time it is difficult to determine the full impact of these efforts on our business. In the United States, many patients with SCD participate in the Medicaid program, and the impact of uncertainty or changes relating to the ACA or healthcare programs, insurance coverage or reimbursement generally have a particularly significant impact on our business or results of operations.
 
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We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are similar, more advanced, or more effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize Oxbryta and our product candidates.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We are currently aware of various existing therapies and development candidates that are or may compete with Oxbryta and inclacumab for the potential treatment of SCD. For example, the FDA approved Novartis’ crizanlizumab in November 2019. Both crizanlizumab and inclacumab are human monoclonal antibodies against
P-selectin
for the treatment of VOCs in patients with SCD. The FDA’s approval of crizanlizumab resulted in another new and innovative SCD product entering the United States SCD market approximately one week earlier than Oxbryta, and substantially earlier than any potential approval of our inclacumab product candidate (which could be a direct competitor to crizanlizumab). As a result, the commercialization of crizanlizumab may also impact our commercialization of Oxbryta in the United States, as well as inclacumab if we are successful in developing and obtaining approval for it for SCD patients. In addition, Novartis announced in October 2020 that the European Commission approved crizanlizumab for the prevention of recurrent VOCs in patients with SCD.
We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies. Many of our competitors have substantially greater financial, technical, and other resources, such as larger research and development, marketing and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than we are able to and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further 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, products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization and market penetration than we do. Additionally, technologies developed by our competitors may render Oxbryta or our product candidates uneconomical or obsolete, and we may not be successful in marketing any drugs or product candidates against competitors.
If the market opportunities for Oxbryta or our product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer. Our ability to successfully identify patients and acquire a significant market share will be necessary for us to achieve profitability and growth.
Our initial development and commercialization efforts are focused on the potential of Oxbryta to treat SCD. Our projections of both the number of people who have SCD, as well as the subset of people with SCD who have the potential to benefit from treatment with Oxbryta, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including the scientific literature, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of SCD. The number of patients may turn out to be lower than expected. The effort to identify patients with diseases we seek to treat is in early stages, and we cannot accurately predict the number of patients for whom treatment might be possible. Additionally, the potential addressable patient population for Oxbryta and our product candidates may be limited or may not be amenable to treatment with Oxbryta or our product candidates, and new patients may become increasingly difficult to identify or gain access to, which would adversely affect our results of operations and our business. Restrictions on labeling of any approved product, including any restrictions that may be imposed in connection with any approval under Subpart H, may also limit the size of the potential market for Oxbryta and our product candidates. Further, even if we obtain significant market share for Oxbryta or any other drug we may develop or obtain, because the potential target populations are small, we may never achieve profitability despite obtaining such significant market share.
Risks Related to Our Financial Position and Need for Additional Capital
We are a biopharmaceutical company with only one drug approved for marketing in the United States and with a limited operating history. We have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable future. We have generated limited revenue since our inception, which, together with our limited operating history, may make it difficult for you to assess our future viability.
We are a biopharmaceutical company with only one drug, Oxbryta, approved for marketing, and such approval is only for the United States. We also have a limited operating history upon which you can evaluate our business and prospects. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. To date, we have focused principally on developing Oxbryta, and our current clinical development activities are focused on Oxbryta and our drug candidates. In August 2018, we entered into an exclusive worldwide license agreement with F. Hoffman-LaRoche and
Hoffman-La
Roche Inc., collectively, Roche, for the development and commercialization of inclacumab.
 
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We are not profitable and have incurred losses in each year since our inception in February 2011 and the commencement of our principal operations in May 2012. Our net losses were $74.9 million and $73.0 million for the three months ended March 31, 2021, and March 31, 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $1.06 billion. We only began to generate revenues with the December 2019 commercial launch of Oxbryta, and have financed our operations primarily through the sale of equity securities and, to a lesser extent, through debt financing. We continue to incur significant research and development and other expenses related to our ongoing operations and expect to incur losses for the foreseeable future. We anticipate these losses will increase as we:
 
   
commercialize Oxbryta and continue related clinical development, including conducting (i) our Phase 2a HOPE-KIDS 1 Study of Oxbryta, (ii) our Phase 3 HOPE-KIDS 2 Study, which we intend to serve as our post-confirmatory study of Oxbryta in SCD (and any other post-marketing studies that may be required by regulatory authorities, if any), and (iii) any additional clinical trials of Oxbryta we may conduct now or in the future in SCD patients or for any other indications for Oxbryta, inclacumab or any other product candidates, if any;
 
   
establish and maintain manufacturing and supply relationships with third parties that can provide adequate supplies (in amount and quality) of Oxbryta, inclacumab or any other product candidates to support commercialization and further clinical development;
 
   
seek and obtain additional regulatory and marketing approvals for Oxbryta for SCD, including for younger pediatric patient populations, or any potential approvals we may pursue for other product candidates;
 
   
maintain a sales and marketing organization and enter into selected collaborations to commercialize Oxbryta for SCD or any other approved indication, as well as for any other product candidates;
 
   
maintain a medical affairs organization to advance our engagement with healthcare providers and stakeholders;
 
   
advance our other programs, including inclacumab and any other product candidates, through nonclinical and clinical development and commence development activities for any additional product candidates we may identify and pursue; and
 
   
expand our organization to support our commercialization, research, development and medical activities and our operations as a public company.
Prior to the December 2019 commercial launch of Oxbryta, we had never generated any revenues from product sales, and we may never be able to achieve significant revenues or profitability. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to maintain adequate cash reserves to commercialize Oxbryta, advance our development programs or achieve approval to commercialize any other products, or our failure to achieve sustained profitability, would depress the value of our company and could impair our ability to raise capital, expand our business, market Oxbryta, diversify our research and development pipeline, market any other product candidates we may identify and pursue (if approved), or continue our operations. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.
We may require substantial additional funds to achieve our business goals. If we are unable to obtain such funds when needed and on acceptable terms, we could be forced to delay, limit or terminate our commercialization activities for Oxbryta, our product development efforts or other operations. Raising additional capital may subject us to unfavorable terms, cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to Oxbryta, our product candidates or technologies.
We are currently commercializing Oxbryta and investigating Oxbryta in clinical development to support its potential full approval by the FDA and opportunities for potential label expansion. Among other activities, we are evaluating the safety and pharmacokinetics of single and multiple doses of Oxbryta in our HOPE-KIDS 1 Study, a Phase 2a clinical trial in adolescent and pediatric patients with SCD. Our clinical program for Oxbryta also includes our HOPE-KIDS 2 Study, which is our TCD post-confirmatory study of Oxbryta in SCD (to potentially satisfy the FDA’s requirement for a post-confirmatory study under Subpart H). In light of the
COVID-19
pandemic, we temporarily delayed or paused our research and development activities, including temporarily pausing screening and enrollment in all
GBT-sponsored
clinical studies (including our HOPE-KIDS 2 Study). Activities on our clinical trials have resumed, with measures in place that we believe are appropriate. In addition, we have initiated and plan to initiate clinical trials on our product candidates, inclacumab and GBT601, and we are conducting nonclinical research activities in other programs. While we have resumed clinical trial activities, we have continued to see a negative impact on enrollment and certain other aspects of our clinical trials that we believe are related to the continuing
COVID-19
pandemic, and we do not know with any certainty the long-term impact of the
COVID-19
pandemic on our clinical development activities.
Discovering, developing and commercializing biopharmaceutical products is expensive and time-consuming, and we expect our selling, general and administrative and research and development expenses to increase substantially in connection with our ongoing activities, particularly as we continue to commercialize Oxbryta and engage in research and development efforts for Oxbryta,
 
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inclacumab and other product candidates that we may identify and pursue in clinical trials. As of March 31, 2021, and December 31, 2020, we had working capital of $499.2 million and $553.1 million, respectively, and capital resources consisting of cash and cash equivalents and short-term marketable securities totaling $482.0 million and $560.9 million, respectively. We expect that our existing capital resources consisting of cash and cash equivalents and marketable securities will be sufficient to fund our operations for at least the next 12 months. Because the outcome of commercialization, reimbursement and any clinical development and regulatory approval process is highly uncertain, we cannot reasonably estimate the actual capital amounts necessary to successfully commercialize Oxbryta and complete our ongoing and planned additional development of activities for Oxbryta or any other future product candidates.
Our operating plan 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 or other sources, such as strategic collaborations or license and development agreements. Any additional fundraising efforts may divert our management from their
day-to-day
activities, which may adversely affect our ability to develop and commercialize Oxbryta, inclacumab or any other product candidates that we may identify and pursue. Moreover, such financing may result in dilution to stockholders, imposition of debt covenants and repayment obligations, or other restrictions that may affect our business. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
Our future funding requirements will depend on many factors, including, but not limited to:
 
   
our ability to successfully commercialize Oxbryta, inclacumab and any other product candidates we may identify and develop in the United States or any other territories;
 
   
the manufacturing, selling, and marketing costs associated with the commercialization of Oxbryta and the potential commercialization of inclacumab and any other product candidates we may identify and develop, including the cost and timing of establishing or maintaining our sales and marketing capabilities in any territory(ies);
 
   
the amount and timing of sales and other revenues from Oxbryta, inclacumab and any other product candidates we may identify and develop, including the sales price and the availability of adequate third-party reimbursement;
 
   
the time and cost necessary to conduct and complete multiple ongoing studies (including our HOPE-KIDS 1 Study, our Phase 3 HOPE-KIDS 2 Study and other studies);
 
   
the time and cost necessary to conduct and complete any additional clinical studies required to pursue additional regulatory approvals for Oxbryta for SCD, including our Phase 3 HOPE-KIDS 2 Study (which is necessary to move from our current Subpart H approval to a full approval) and any studies to support potential label expansions into younger SCD pediatric populations, or any other post-marketing studies for Oxbryta for SCD;
 
   
the progress, data and results of clinical trials of Oxbryta and product candidates;
 
   
the progress, timing, scope and costs of our nonclinical studies, our clinical trials and other related activities, including our ability to enroll subjects in a timely manner for our ongoing and future clinical trials of Oxbryta, inclacumab or any other product candidate that we may identify and develop;
 
   
the costs of obtaining clinical and commercial supplies of Oxbryta, inclacumab and any other product candidates we may identify and develop;
 
   
our ability to advance our development programs, including for Oxbryta, inclacumab and any other potential product candidate programs we may identify and pursue, the timing and scope of these development activities, and the availability of approval for any of our other product candidates;
 
   
our ability to successfully obtain any additional regulatory approvals from any regulatory authorities, and the scope of any such regulatory approvals, to market and sell Oxbryta, inclacumab and any other product candidates we may identify and develop in any territory(ies);
 
   
the cash requirements of any future acquisitions or discovery of product candidates;
 
   
the time and cost necessary to respond to technological and market developments;
 
   
the extent to which we may acquire or
in-license
other product candidates and technologies, and the costs and timing associated with any such acquisitions or
in-licenses;
 
   
our ability to attract, hire, and retain qualified personnel; and
 
   
the costs of maintaining, expanding, and protecting our intellectual property portfolio.
 
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Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit or terminate our development or commercialization activities for Oxbryta, inclacumab or for any other product candidates we may identify and pursue, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially and adversely affect our business, prospects, financial condition and results of operations.
We are party to a loan and security agreement that contains operating and financial covenants that may restrict our business and financing activities.
In December 2019, we entered into a loan agreement, or Term Loan, with funds managed by Pharmakon Advisors LP, which are BioPharma Credit PLC, as collateral agent, Biopharma Credit Investments V (Master) LP, as a lender, and BPCR Limited Partnership, as a lender, for a senior secured credit facility under which we were extended an aggregate of $150 million. Borrowings under the Term Loan are secured by a first priority security interest in and a lien on substantially all of our assets, subject to certain exceptions.
The Term Loan restricts our ability, among other things, to:
 
   
sell, transfer or otherwise dispose of any of our business or property, subject to limited exceptions;
 
   
make certain changes to our organizational structure;
 
   
consolidate or merge with other entities or acquire other entities;
 
   
incur additional indebtedness or create encumbrances on our assets;
 
   
pay dividends, other than dividends paid solely in shares of our common stock, or make distributions on and, in certain cases, repurchase our stock;
 
   
repay subordinated indebtedness; or
 
   
make certain investments.
In addition, we are required under the Term Loan to comply with various operating covenants and default clauses that may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies. A breach of any of these covenants or clauses could result in a default under the Term Loan, which could cause all of the outstanding indebtedness under the facility to become immediately due and payable.
If we are unable to generate sufficient cash to repay our debt obligations when they become due and payable, we may not be able to obtain additional debt or equity financing on favorable terms, if at all, which may negatively affect our business operations and financial condition.
Risks Related to Our Business and the Clinical Development, Regulatory Review and Approval of Our Product Candidates
If we are unable to obtain regulatory approval in additional jurisdictions for Oxbryta or one or more jurisdictions for inclacumab or any future product candidates that we may identify and develop, our business will be substantially harmed.
We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Approval by the FDA and comparable foreign regulatory authorities such as the European Medicines Agency, or EMA, is lengthy and unpredictable and depends upon numerous factors. Approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. We have only obtained regulatory approval for Oxbryta in the United States. In January 2021, the EMA accepted for review our Marketing Authorization Application, or MAA, seeking full marketing authorization of Oxbryta to treat hemolytic anemia in SCD patients ages 12 years and older, and the MAA is undergoing standard review by the EMA. We also plan to submit by
mid-2021
a supplemental New Drug Application, or sNDA, to expand the current label for Oxbryta to include treatment of SCD in children ages 4 to 11 years, under the FDA’s accelerated approval pathway. Thereafter, we also plan to submit a New Drug Application, or NDA, for a new
age-appropriate
formulation for this patient population. In addition, Great Britain will no longer be covered by centralized MAs, which, if granted, will include our MA for Oxbryta, as a result of the UK’s exit from the EU (often referred to as Brexit). We, therefore, plan to utilize the decision reliance procedure available for a period of two years from January 1, 2021, to seek approval of Oxbryta in Great Britain by the Medicines and Healthcare products Regulatory Agency, or MHRA, if our MA is granted by the EMA. While utilizing such decision reliance procedure may significantly accelerate the potential regulatory approval of Oxbryta in Great Britain as compared to making a completely separate application in parallel to our EMA MAA, we will still need to make a separate application to the
 
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MHRA and there is no guarantee as to if or when the MHRA will approve such application. It is possible that we will never obtain these or any other regulatory approvals for Oxbryta, for inclacumab or for any other product candidates we may seek to develop in the future.
Applications for product candidates could fail to receive regulatory approval for many reasons, including, but not limited to:
 
   
we may not be able to demonstrate to the satisfaction of regulatory authorities (including the EMA and MHRA) that Oxbryta, inclacumab or any other product candidates we may develop are safe and effective for any proposed indications;
 
   
the FDA or comparable foreign regulatory authorities may disagree with our plans or expectations regarding the pathways and endpoints for approval, including the availability of accelerated approval, or the design or implementation of our nonclinical studies or clinical trials;
 
   
the populations studied in our clinical programs may not be sufficiently broad or representative to assure safety or demonstrate efficacy in the full population for which we seek approval;
 
   
the FDA or comparable foreign regulatory authorities may require additional nonclinical studies or clinical trials beyond those we anticipate;
 
   
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data and results from our nonclinical studies or clinical trials;
 
   
the data and results collected from nonclinical studies or clinical trials of Oxbryta, inclacumab and any other product candidates that we may identify and pursue may not be sufficient to support the submission for regulatory approval;
 
   
we may be unable to demonstrate to the FDA or comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio for its proposed indication is acceptable;
 
   
the FDA or comparable foreign regulatory authorities may find deficiencies with or fail to approve the manufacturing processes, test procedures and specifications, or facilities of third-party manufacturers with which we contract and rely on for all clinical and commercial supplies of Oxbryta, inclacumab and any other product candidates (if any); and
 
   
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may change in a manner that renders our development or manufacturing efforts insufficient for approval.
The lengthy regulatory review and approval process, as well as the inherent unpredictability of the results of nonclinical studies and clinical trials, and our reliance on third-party manufacturers for any product candidates, may result in our failure to obtain regulatory approval to market Oxbryta outside of the United States or to market inclacumab or other product candidates that we may pursue in the United States or elsewhere, which would significantly harm our business, prospects, financial condition and results of operations. 
Expedited development and regulatory approval programs for Oxbryta, such as the accelerated approval under Subpart H, may not lead to a faster development or regulatory review or approval process, may not lead to any approval, and may lead to an approval that is later withdrawn.
The FDA approved Oxbryta through the accelerated approval process under Subpart H, and we plan to seek approval under the accelerated approval process under Subpart H for a sNDA to expand the current Oxbryta label to include treatment of SCD in children ages 4 to 11 years. While the FDA approved Oxbryta under Subpart H, we cannot be assured that our planned sNDA will benefit from or receive accelerated approval under Subpart H, or that any other product candidates that we may develop will qualify for or benefit from any such expedited programs in the United States, including under Subpart H, or in any foreign regulatory jurisdictions.
In June 2017, the EMA granted PRIME designation for Oxbryta for the treatment of SCD. The PRIME program is a regulatory mechanism that provides for early and proactive EMA support to medicine developers to help patients benefit as early as possible from innovative new products that have demonstrated the potential to significantly address an unmet medical need. We cannot be assured that Oxbryta or any other product candidates that we may develop will benefit from a PRIME program designation.
The FDA grants accelerated approval under Subpart H for new drugs that address serious or life-threatening illnesses and that provide meaningful therapeutic benefit to patients over existing treatments. Under Subpart H, the FDA may grant marketing approval for a new drug product on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity.
 
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Drugs approved under Subpart H are required to be further evaluated in at least one post-marketing study to verify clinical benefit. To satisfy such requirement, we are conducting our TCD post-confirmatory study, the HOPE-KIDS 2 Study. We previously announced that the FDA agreed that TCD flow velocity would be an acceptable primary endpoint in a post-approval confirmatory study of Oxbryta to demonstrate stroke risk reduction for purposes of full approval by the FDA and that we had reached final agreement with the FDA on the design of the TCD post-confirmatory study.
We may not be able to complete the HOPE-KIDS 2 Study or any other successful post-marketing confirmatory study as required to maintain approval and achieve full approval. In addition, data and results from our required post-marketing confirmatory program may not verify Oxbryta’s clinical benefit to maintain approval and achieve full approval, in which case the product may be required to be withdrawn from market approval.
We temporarily paused screening and enrollment on our HOPE-KIDS 2 Study due to the impact of the
COVID-19
pandemic. Activities on our clinical trials have resumed, with measures in place that we believe are appropriate. While we have resumed clinical trial activities, we have continued to see a negative impact on enrollment and certain other aspects of our clinical trials that we believe are related to the continuing
COVID-19
pandemic, and we do not know with any certainty the long-term impact of the
COVID-19
pandemic on our HOPE-KIDS 2 Study.
Access to any expedited program, including through the FDA (such as accelerated approval under Subpart H), may be withdrawn by the FDA or a foreign regulatory authority if it believes that the program is no longer supported by data from our clinical development, and accelerated approval under Subpart H may be withdrawn if, among other reasons, required post-marketing confirmatory studies are not completed or if the FDA determines the results of post-marketing confirmatory studies do not verify clinical benefit.
All of our programs other than Oxbryta are still in earlier development stages, so we remain very reliant on the potential success of Oxbryta in the clinic and in the marketplace. If we are unable to successfully commercialize Oxbryta for SCD or complete clinical development of Oxbryta, or experience delays in doing so, our business will be materially harmed.
To date, we have invested a majority of our efforts and financial resources in the nonclinical and clinical development of Oxbryta, including conducting nonclinical studies and clinical trials, submitting and obtaining approval for an NDA, and providing general and administrative support for these operations. Our other clinical product candidates are in the earlier stages of development, and our only clinical development program for Oxbryta is in SCD. Our future success is highly dependent on our ability to successfully continue to develop, obtain and maintain regulatory approval for, and commercialize Oxbryta inside and outside the United States for SCD.
We are evaluating Oxbryta in SCD patients in our ongoing HOPE-KIDS 1 Study, our HOPE-KIDS 2 Study (which is our post-approval confirmatory study), and other ongoing and planned clinical trials. In light of the
COVID-19
pandemic, we temporarily delayed or paused certain of our research and development activities, including temporarily pausing scre