Q32 Bio Inc

Previous wording

ADX-097, the lead product candidate from our complement inhibitor platform, is a humanized anti-C3d monoclonal antibody, or mAb, fusion protein. ADX-097 is designed to restore complement regulation – an integral part of the innate immune system – through a tissue targeted mechanism. ADX-097 is designed to inhibit alternative pathway complement activation locally in diseased tissues where complement-mediated pathology is actively manifest. We believe ADX-097 has the potential to drive improved clinical activity and address the limitations of the currently available systemic approaches to complement inhibition, including infection risk and the need for high drug doses and frequent administration, to achieve therapeutic levels of inhibition. We are developing ADX-097 for the treatment of renal and other complement-mediated diseases of high unmet need, including lupus nephritis, or LN, immunoglobulin A nephropathy, or IgAN, complement component 3 glomerulopathy, or C3G, and anti-neutrophil cytoplasmic antibody, or ANCA-associated vasculitis, or AAV. We have completed a Phase 1 clinical trial of ADX-097 in healthy volunteers. We initiated and are enrolling patients in an open-label Phase 2 renal basket program in the first half of 2024 and expect to initiate a Phase 2 clinical trial in AAV in the first half of 2025, with initial renal basket data anticipated by the end of 2024 and topline data from both the renal basket and AAV trials anticipated in the second half of 2025.

Current wording

ADX-097, the lead product candidate from our complement inhibitor platform, is a humanized anti-C3d monoclonal antibody, or mAb, fusion protein. ADX-097 is designed to restore complement regulation – an integral part of the innate immune system – through a tissue targeted mechanism. ADX-097 is designed to inhibit alternative pathway complement activation locally in diseased tissues where complement-mediated pathology is actively manifest. We believe ADX-097 has the potential to drive improved clinical activity and address the limitations of the currently available systemic approaches to complement inhibition, including infection risk and the need for high drug doses and frequent administration, to achieve therapeutic levels of inhibition. We are developing ADX-097 for the treatment of renal and other complement-mediated diseases of high unmet need, including lupus nephritis, or LN, immunoglobulin A nephropathy, or IgAN, complement component 3 glomerulopathy, or C3G, and anti-neutrophil cytoplasmic antibody, or ANCA-associated vasculitis, or AAV. We have completed a Phase 1 clinical trial of ADX-097 in healthy volunteers. We initiated and are enrolling patients in an open-label Phase 2 renal basket program and expect to initiate a Phase 2 clinical trial in AAV in the first half of 2025, with initial renal basket data anticipated in the first half of 2025 and topline data from both the renal basket and AAV trials anticipated in the second half of 2025.

Previous wording

As of June 30, 2024, we had cash, cash equivalents and short-term investments of $107.6 million. We expect that our cash, cash equivalents and short-term investments will be sufficient to enable us to fund our operating expenses and capital expenditure requirements to mid-2026. This estimate is based on assumptions that may prove to be wrong, and we could use our capital resources sooner than currently anticipated.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $89.1 million. We expect that our cash and cash equivalents will be sufficient to enable us to fund our operating expenses and capital expenditure requirements to mid-2026. This estimate is based on assumptions that may prove to be wrong, and we could use our capital resources sooner than currently anticipated.

Previous wording

We do not expect our existing cash, cash equivalents, and short-term investments will be sufficient for us to advance any of our programs through regulatory approval, and we will need to raise additional capital to complete the development and potential commercialization of any of our programs. We may also use a portion of our cash, cash equivalents, and short-term investments, to acquire, in-license or invest in products, technologies or businesses that are complementary to our business. The amounts and timing of actual expenditures will depend on numerous factors, including the progress of development efforts, operating costs and other factors described under “Risk Factors” in this Quarterly Report on Form 10-Q.

Current wording

We do not expect our existing cash and cash equivalents will be sufficient for us to advance any of our programs through regulatory approval, and we will need to raise additional capital to complete the development and potential commercialization of any of our programs. We may also use a portion of our cash and cash equivalents to acquire, in-license or invest in products, technologies or businesses that are complementary to our business. The amounts and timing of actual expenditures will depend on numerous factors, including the progress of development efforts, operating costs and other factors described under “Risk Factors” in this Quarterly Report on Form 10-Q.

Previous wording

The expected use of proceeds represents current intentions based upon present plans and business condition. As of the date of this Quarterly Report on Form 10-Q, we cannot predict with complete certainty all of the particular uses for our current cash, cash equivalents and short-term investments or the actual amounts that we will spend on the uses set forth above.

Current wording

The expected use of proceeds represents current intentions based upon present plans and business conditions. As of the date of this Quarterly Report on Form 10-Q, we cannot predict with complete certainty all of the particular uses for our current cash and cash equivalents or the actual amounts that we will spend on the uses set forth above.

Previous wording

Upon the execution of the Horizon Termination Agreement, Legacy Q32 became obligated to pay Horizon up to $75.1 million contingent on regulatory and sales-based milestones or up to $20.1 million in excess of the cash received. These potential payments to the customer are not in exchange for a distinct good or service; therefore, we are accounting for consideration payable to a customer as a reduction of the transaction price under ASC 606. Legacy Q32 concluded that the $55.0 million of arrangement consideration previously recognized should be fully constrained as a result of the contingent consideration payable to the customer, and accordingly, all amounts previously recognized as revenue were reversed in the fourth quarter of 2023 and a refund liability was established for the $55.0 million cash received during the term of the collaboration agreement. No amounts have been recognized related to the remaining potential payment to Horizon (up to $20.1 million) as it cannot be deemed probable that the respective milestones will be achieved at this time.

Current wording

Upon the execution of the Horizon Termination Agreement, Legacy Q32 became obligated to pay Horizon up to $75.1 million contingent on regulatory and sales-based milestones or up to $20.1 million in excess of the cash received. These potential payments to the customer are not in exchange for a distinct good or service; therefore, we are accounting for consideration payable to a customer as a reduction of the transaction price under ASC 606. Legacy Q32 concluded that the $55.0 million of arrangement consideration previously recognized should be fully constrained as a result of the contingent consideration payable to the customer, and accordingly, all amounts previously recognized as revenue were reversed in the fourth quarter of 2023 and a refund liability was established for the

Previous wording

employee-related expenses, including salaries, benefits, and stock-based compensation expense, for personnel engaged in research and development functions; and

Current wording

employee-related expenses, including salaries, benefits, and stock-based compensation expense, for personnel engaged in research and development functions;

Previous wording

facilities-related expenses, depreciation, supplies, travel expenses and other allocated expenses.

Current wording

facilities-related expenses, depreciation, supplies, travel expenses and other allocated expenses; and

Previous wording

Legacy Q32 recognized a liability as a result of the issuance of convertible promissory notes, or the Convertible Notes. We account for all convertible notes issued under the fair value option election of FASB ASC Topic 825, Financial Instruments, or ASC 825. The financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment is recognized within other income (expense) in the accompanying unaudited condensed consolidated statements of operations and the portion of the fair value adjustment attributed to a change in the instrument-specific credit risk is recognized as a component of other comprehensive loss, if any.

Current wording

Legacy Q32 recognized a liability as a result of the issuance of convertible promissory notes, or the Convertible Notes. We account for all convertible notes issued under the fair value option election of FASB ASC Topic 825, Financial Instruments, or ASC 825. The financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment is recognized within other income (expense), net in the accompanying unaudited condensed consolidated statements of operations and the portion of the fair value adjustment attributed to a change in the instrument-specific credit risk is recognized as a component of other comprehensive loss, if any.

Previous wording

Upon closing of the Merger, Legacy Q32 converted the outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a noncash gain of $15.9 million on the change in fair value prior to the conversion of convertible notes is reflected in the unaudited condensed consolidated statement of operation for the six months ended June 30, 2024.

Current wording

Upon closing of the Merger, Legacy Q32 converted the outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a noncash gain of $15.9 million on the change in fair value prior to the conversion of convertible notes is reflected in the unaudited condensed consolidated statement of operation for the nine months ended September 30, 2024.

Previous wording

Other income (expense), net consists of interest income primarily earned on money market fund accounts and other short-term investments and interest expense related to our debt obligations. Also, we use the cost method to account for an investment in an entity in which we do not have the ability to exercise significant influence over operating and financial policies. Investments recorded using the cost method are assessed for any decrease in value that has occurred that is other than temporary and the other than temporary decrease in value is recognized in other income (expense), net.

Current wording

Other income (expense), net consists of interest income primarily earned on money market fund accounts and other short-term investments and interest expense related to our debt obligations. We use the cost method to account for an investment in an entity in which we do not have the ability to exercise significant influence over operating and financial policies. Investments recorded using the cost method are assessed for any decrease in value that has occurred that is other than temporary and the other than temporary decrease in value is recognized in other income (expense), net. We recognize the change in fair value of the CVR liability in other income (expense), net.

Previous wording

We recognized no collaboration arrangement revenue for the three months ended June 30, 2024, compared to $3.2 million for the three months ended June 30, 2023. Legacy Q32 executed the Horizon Collaboration Agreement in August 2022 and began performing research services and recognizing revenue in the first quarter of 2023 accordingly. Upon execution of the Horizon Termination Agreement and pursuant to ASC 606, all previously recognized amounts were reversed in the fourth quarter of 2023. See further discussion under “Revenue” above.

Current wording

We recognized no collaboration arrangement revenue for the three months ended September 30, 2024, compared to $1.9 million for the three months ended September 30, 2023. Legacy Q32 executed the Horizon Collaboration Agreement in August 2022 and began performing research services and recognizing revenue in the first quarter of 2023 accordingly. Upon execution of the Horizon Termination Agreement and pursuant to ASC 606, all previously recognized amounts were reversed in the fourth quarter of 2023. See further discussion under “Revenue” above.

Previous wording

The increase in personnel-related and consultant costs was primarily related to an increase in headcount as compared to the same period in the prior year. Personnel-related and consultant costs for the three months ended June 30, 2024 and 2023 included stock-based compensation expense of $0.4 million and $0.1 million, respectively.

Current wording

The increase in personnel-related and consultant costs was primarily related to an increase in headcount as compared to the same period in the prior year. Personnel-related and consultant costs for the three months ended September 30, 2024 and 2023 included stock-based compensation expense of $0.3 million and $0.1 million, respectively.

Previous wording

General and administrative expenses were $4.5 million for the three months ended June 30, 2024, compared to $2.5 million for the three months ended June 30, 2023. The increase is primarily due to increased stock-based compensation expense as well as increased consulting and public company-related costs.

Current wording

General and administrative expenses were $4.4 million for the three months ended September 30, 2024, compared to $2.2 million for the three months ended September 30, 2023. The increase is primarily due to increased stock-based compensation expense as well as increased consulting and public company-related costs.

Previous wording

Upon closing of the Merger in March 2024, Legacy Q32 converted its outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. The change in the fair value of the convertible notes was $1.3 million for the three months ended June 30, 2023.

Current wording

Upon closing of the Merger in March 2024, Legacy Q32 converted its outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. The change in the fair value of the convertible notes was $6.3 million for the three months ended September 30, 2023.

Previous wording

Other income (expense), net was $2.4 million for the three months ended June 30, 2024, compared to $0.2 million for the three months ended June 30, 2023. Other income (expense), net for the three months ended June 30, 2024 includes the change in fair value of the CVR liability of $1.4 million, as well as interest income of $1.4 million partially offset by interest expense of $0.3 million on our venture debt. The increase in other income (expense), net is due to the change in fair value of the CVR liability that was not present in the prior year, as well as a higher average cash balance resulting in higher interest income for the three months ended June 30, 2024.

Current wording

Other income (expense), net was $1.2 million for the three months ended September 30, 2024, compared to $0.1 million for the three months ended September 30, 2023. Other income (expense), net for the three months ended September 30, 2024 includes a gain recorded for the change in fair value of the CVR liability of $1.0 million, as well as interest income of $1.2 million. These increases are partially offset by an other-than-temporary impairment charge of approximately $0.7 million we recorded because it was determined that the fair value of our equity investment in OXB (US) LLC was less than its carrying value and interest expense of $0.3 million on our venture debt. The increase in other income (expense), net is due to the change in fair value of the CVR liability that was not present in the prior year, as well as a higher average cash balance resulting in higher interest income for the three months ended September 30, 2024.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023:

Previous wording

We recognized no collaboration arrangement revenue for the six months ended June 30, 2024, compared to $6.2 million for the six months ended June 30, 2023. Legacy Q32 executed the Horizon Collaboration Agreement in August 2022 and began performing research services and recognizing revenue in the first quarter of 2023 accordingly. Upon execution of the Horizon Termination Agreement and pursuant to ASC 606, all previously recognized amounts were reversed in the fourth quarter of 2023. See further discussion under “Revenue” above.

Current wording

We recognized no collaboration arrangement revenue for the nine months ended September 30, 2024, compared to $8.0 million for the nine months ended September 30, 2023. Legacy Q32 executed the Horizon Collaboration Agreement in August 2022 and began performing research services and recognizing revenue in 2023 accordingly. Upon execution of the Horizon Termination Agreement and pursuant to ASC 606, all previously recognized amounts were reversed in the fourth quarter of 2023. See further discussion under “Revenue” above.

Previous wording

The following table summarizes our research and development expenses for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our research and development expenses for the nine months ended September 30, 2024 and 2023:

Previous wording

Research and development expenses were $13.4 million for the three months ended June 30, 2024, compared to $8.0 million for the three months ended June 30, 2023. Expenses related to our ADX-097 program decreased as the program was winding down after the completion of the Phase 1 clinical trials in 2023, including a decrease of $0.5 million in Phase 1 clinical study costs and a decrease of $0.2 million in research costs when compared to the prior year. Expenses related to our bempikibart program increased as we continued to advance both clinical trials. Specifically, costs related to manufacturing clinical trial materials increased by $3.7 million and clinical spend increased by $1.8 million as we enrolled patients in both trials. These increases were partially offset by a decrease in toxicology costs of $0.1 million as compared to the prior year.

Current wording

Research and development expenses were $37.6 million for the nine months ended September 30, 2024, compared to $23.4 million for the nine months ended September 30, 2023. The increase of $14.2 million was primarily due to direct research and development expenses related to our bempikibart program. Bempikibart program expenses increased by $14.3 million due to higher clinical costs of $10.9 million, including a development milestone payment of $4.0 million to BMS pursuant to the BMS License Agreement, as we completed enrollment and treated patients in both Phase 2 trials and higher costs related to manufacturing clinical trial materials of $4.2 million, partially offset by a decrease in toxicology costs of $0.6 million as compared to the prior year. ADX-097 program expenses decreased by $1.7 million primarily due to a decrease of $1.3 million in clinical trial costs as the program was winding down after the completion of the Phase 1 clinical trials in 2023.

Previous wording

The increase in personnel-related and consultant costs was primarily due to higher headcount. Personnel-related and consultant costs for the six months ended June 30, 2024 and 2023 included stock-based compensation expense of $0.5 million and $0.2 million, respectively.

Current wording

The increase in personnel-related and consultant costs was primarily due to higher headcount. Personnel-related and consultant costs for the nine months ended September 30, 2024 and 2023 included stock-based compensation expense of $0.9 million and $0.4 million, respectively.

Previous wording

General and administrative expenses were $9.5 million for the six months ended June 30, 2024, compared to $4.9 million for the six months ended June 30, 2023. The increase is primarily due to costs associated with the Merger, including severance and retention payments to former employees of Homology, as well as other public company-related costs. General and administrative expenses include stock-based compensation expense of $1.2 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

General and administrative expenses were $14.0 million for the nine months ended September 30, 2024, compared to $7.1 million for the nine months ended September 30, 2023. The increase is primarily due to costs associated with the Merger, including severance and retention payments to former employees of Homology, as well as other public company-related costs. General and administrative expenses include stock-based compensation expense of $2.3 million and $0.5 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Upon closing of the Merger, Legacy Q32 converted its outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a gain of $15.9 million on the change in fair value prior to the conversion of convertible notes is reflected in the unaudited condensed consolidated statement of operation for the six months ended June 30, 2024. The change in the fair value of the convertible notes was $1.3 million for the six months ended June 30, 2023.

Current wording

Upon closing of the Merger, Legacy Q32 converted its outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a gain of $15.9 million on the change in fair value prior to the conversion of the Convertible Notes is reflected in the unaudited condensed consolidated statement of operation for the nine months ended September 30, 2024. The change in the fair value of the Convertible Notes was $5.0 million for the nine months ended September 30, 2023.

Previous wording

Other income (expense), net was $2.5 million for the six months ended June 30, 2024, compared to $0.7 million for the six months ended June 30, 2023. Other income (expense), net for the six months ended June 30, 2024 includes the change in fair value of the CVR liability of $1.4 million, as well as interest income of $1.7 million partially offset by interest expense of $0.5 million on our venture debt. The increase in other income (expense), net is due the change in fair value of the CVR liability that was not present in the prior year, as well as a higher average cash balance resulting in higher interest income for the six months ended June 30, 2024.

Current wording

Other income (expense), net was $3.4 million for the nine months ended September 30, 2024, compared to $0.8 million for the nine months ended September 30, 2023. Other income (expense), net for the nine months ended September 30, 2024 includes a gain recorded for the change in fair value of the CVR liability of $2.4 million, as well as interest income of $3.0 million. These increases are partially offset by an other-than-temporary impairment charge of approximately $0.7 million we recorded because it was determined that the fair value of our equity investment in OXB (US) LLC was less than its carrying value and interest expense of $0.8 million on our venture debt. The increase in other income (expense), net is due the change in fair value of the CVR liability that was not present in the prior year, as well as a higher average cash balance resulting in higher interest income for the nine months ended September 30, 2024.

Previous wording

Prior to May 22, 2024, we accounted for our investment in OXB (US) LLC using the equity method of accounting and recorded our share of gains or losses from OXB (US) LLC on a quarterly basis. For the six months ended June 30, 2024, we recorded a loss from equity method investment of $1.6 million, representing our share of OXB (US) LLC’s net loss. See Notes 2 and 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding the equity method of accounting.

Current wording

Prior to May 22, 2024, we accounted for our investment in OXB (US) LLC using the equity method of accounting and recorded our share of gains or losses from OXB (US) LLC on a quarterly basis. For the nine months ended September 30, 2024, we recorded a loss from equity method investment of $1.6 million, representing our share of OXB (US) LLC’s net loss. See Notes 2 and 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding the equity method of accounting.

Previous wording

Since inception, we have incurred significant operating losses and negative cash flows from operations. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. To date, we have funded our operations primarily from proceeds from the sales of our convertible preferred stock, convertible notes, venture debt, and proceeds from the Horizon Collaboration Agreement and from the Merger with Homology and accompanying Pre-Closing Financing. From inception through June 30, 2024, we raised $111.4 million in aggregate cash proceeds, net of issuance costs, from the sales of our Series A convertible preferred stock, Series A-1 convertible preferred stock and Series B convertible preferred stock and received payments of $55.0 million in connection with the Horizon Collaboration Agreement. We also received $30.0 million from the sales of convertible notes, $12.5 million from our venture debt, $61.3 million, net of issuance costs, in connection with the Merger with Homology and $42.0 million pursuant to the Pre-Closing Financing. As of June 30, 2024, we had cash, cash equivalents and short-term investments of $107.6 million.

Current wording

Since inception, we have incurred significant operating losses and negative cash flows from operations. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. To date, we have funded our operations primarily from proceeds from the sales of our convertible preferred stock, convertible notes, venture debt, and proceeds from the Horizon Collaboration Agreement and from the Merger with Homology and accompanying Pre-Closing Financing. From inception through September 30, 2024, we raised $111.4 million in aggregate cash proceeds, net of issuance costs, from the sales of our Series A convertible preferred stock, Series A-1 convertible preferred stock and Series B convertible preferred stock and received payments of $55.0 million in connection with the Horizon Collaboration Agreement. We also received $30.0 million from the sales of convertible notes, $12.5 million from our venture debt, $61.3 million, net of issuance costs, in connection with the Merger with Homology and $42.0 million pursuant to the Pre-Closing Financing. As of September 30, 2024, we had cash and cash equivalents of $89.1 million.

Previous wording

We have incurred significant operating losses since inception and, as of June 30, 2024, had an accumulated deficit of $203.0 million. We expect negative cash flows from operations and net losses for the foreseeable future as we continue to invest significantly in research and development of our product candidates and platform. We have not yet commercialized any product and do not expect to generate revenue from sales of any products for several years, if at all.

Current wording

We have incurred significant operating losses since inception and, as of September 30, 2024, had an accumulated deficit of $220.6 million. We expect negative cash flows from operations and net losses for the foreseeable future as we continue to invest significantly in research and development of our product candidates and platform. We have not yet commercialized any product and do not expect to generate revenue from sales of any products for several years, if at all.

Previous wording

As of June 30, 2024, we had cash, cash equivalents and short-term investments of $107.6 million. We expect that our cash, cash equivalents and short-term investments as of June 30, 2024, will be sufficient to fund our operations through mid-2026. Management based its projections of operating capital requirements on our current operating plan, which includes several assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than management expects. We expect to seek to raise additional capital through private or public equity or debt financings, loans or other capital sources, which could include collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties, or from grants, and may be required to seek additional capital sooner than planned. However, there can be no assurances that we will be able to raise additional capital from these sources on favorable terms, or at all.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $89.1 million. We expect that our cash and cash equivalents as of September 30, 2024, will be sufficient to fund our operations through mid-2026. Management based its projections of operating capital requirements on our current operating plan, which includes several assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than management expects. We expect to seek to raise additional capital through private or public equity or debt financings, loans or other capital sources, which could include collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties, or from grants, and may be required to seek additional capital sooner than planned. However, there can be no assurances that we will be able to raise additional capital from these sources on favorable terms, or at all.

Previous wording

For the six months ended June 30, 2024, net cash used in operating activities was $36.8 million, which was primarily utilized for the funding of our operating expenses of $32.8 million as we incurred expenses associated with research and development activities including clinical trial activities associated with our bempikibart and ADX-097 programs, adjusted for non-cash expenses of $13.5 million. Non-cash expenses include a gain of $15.9 million recognized on the change in fair value prior to the conversion of convertible notes pursuant to the Merger with Homology on March 25, 2024, a gain of $1.4 million recognized on the change in fair value of the CVR liability, stock-based compensation expense of $1.7 million, loss from our equity method investment of $1.6 million, non-cash lease expenses of $0.3 million, depreciation expense of $0.2 million and amortization of premium on short-term investments of $0.2 million. The change in net operating assets and liabilities was primary attributable to a decrease in accrued expenses and other current liabilities of $4.9 million, a decrease in accounts payable of $1.5 million, an increase in other noncurrent assets of $0.6 million and a decrease in our operating lease liability of $0.5 million, partially offset by a decrease in prepaid expenses and other current assets of $0.2 million.

Current wording

For the nine months ended September 30, 2024, net cash used in operating activities was $56.3 million, which was primarily utilized for the funding of our operating expenses of $51.6 million as we incurred expenses associated with research and development activities including clinical trial activities associated with our bempikibart and ADX-097 programs, adjusted for non-cash expenses of $12.1 million. Non-cash expenses include a gain of $15.9 million recognized on the change in fair value prior to the conversion of the Convertible Notes pursuant to the Merger with Homology on March 25, 2024, a gain of $2.4 million recognized on the change in fair value of the CVR liability and amortization of premium on short-term investments of $0.2 million, partially offset by stock-based compensation expense of $3.1 million, losses related to our investment in OXB (US) LLC of $2.3 million, non-cash lease expenses of $0.4 million, depreciation expense of $0.4 million and amortization of debt discount and issuance costs of $0.1 million. The change in net operating assets and liabilities was primarily attributable to a decrease in accrued expenses and other current liabilities of $6.7 million, a decrease in accounts payable of $2.8 million, a decrease in our operating lease liability of $1.0 million and an increase in prepaid expenses and other current assets of $0.6 million, partially offset by a decrease in other noncurrent assets of $0.5 million.

Previous wording

For the six months ended June 30, 2023, net cash used in operating activities of $23.9 million consisted of our net loss of $12.6 million and a change in net operating assets and liabilities of $11.1 million. The change in net operating assets and liabilities was primarily attributable to a decrease in deferred revenue of $6.2 million, a decrease in accrued expenses and other current liabilities of $4.0 million and a decrease in accounts payable of $0.7 million. The non-cash operating expenses consisted mainly of the change in fair value of the convertible notes of $1.3 million, stock-based compensation expense of $0.6 million, non-cash lease expenses of $0.3 million and depreciation expense of $0.3 million.

Current wording

For the nine months ended September 30, 2023, net cash used in operating activities of $8.0 million consisted of our net loss of $26.7 million, partially offset by a change in net operating assets and liabilities of $12.0 million and net non-cash operating expenses of $6.7 million. The change in net operating assets and liabilities was primarily attributable to an increase in deferred revenue, accounts payables and other non-current assets of $14.4 million, partially offset by a decrease in prepaid expenses and other current assets, operating lease liability and accrued expenses and other current liabilities of $2.4 million. The non-cash operating expenses consisted of a $5.0 million change in fair value of the Convertible Notes, stock-based compensation expense of $0.9 million, non-cash lease expenses of $0.4 million, and depreciation expense of $0.4 million.

Previous wording

For the six months ended June 30, 2024, net cash provided by investing activities consisted of maturities of short-term investments during the period since the Merger.

Current wording

For the nine months ended September 30, 2024, net cash provided by investing activities consisted of maturities of short-term investments during the period since the Merger, partially offset by purchases of property and equipment.

Previous wording

For the six months ended June 30, 2023, net cash used in investing activities consisted of purchases of property and equipment.

Current wording

For the nine months ended September 30, 2023, net cash used in investing activities consisted of purchases of property and equipment.

Previous wording

For the six months ended June 30, 2024, net cash provided by financing activities consisted of $53.2 million of cash acquired as part of the Merger, $42.0 million of proceeds from the issuance of common stock in the pre-closing financing and $7.0 million of proceeds from the borrowings under a new loan and security agreement, slightly offset by payments of $8.7 million of transaction costs related to the Merger.

Current wording

For the nine months ended September 30, 2024, net cash provided by financing activities consisted of $53.2 million of cash acquired as part of the Merger, $42.0 million of proceeds from the issuance of common stock in the pre-closing financing, $7.0 million of proceeds from the borrowings under a new loan and security agreement and $1.4 million of proceeds from the exercise of stock options, slightly offset by payments of $8.7 million of transaction costs related to the Merger.

Previous wording

To complete the development of our product candidates and to build the sales, marketing and distribution infrastructure that management believes will be necessary to commercialize our product candidates, if approved, we will require substantial additional capital. Accordingly, until such time that we can generate a sufficient revenue from product sales or other sources, if ever, management expects to seek to raise any necessary additional capital through private or public equity or debt financings, loans or other capital sources, which could include income from collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. To the extent that we raise additional capital through equity financings or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting our ability to incur liens, issue additional debt, pay dividends, repurchase our own common stock, make certain investments or engage in merger, consolidation, licensing, or asset sale transactions. If we raise capital through collaborations, partnerships, and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. We may be unable to raise additional capital from these sources on favorable terms, or at all. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from recent bank failures. The failure to obtain sufficient capital on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including requiring us to delay, reduce or curtail our research, product development or future commercialization efforts. We may also be required to license rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Management cannot provide assurance that we will ever generate positive cash flow from operating activities.

Current wording

To complete the development of our product candidates and to build the sales, marketing and distribution infrastructure that management believes will be necessary to commercialize our product candidates, if approved, we will require substantial additional capital. Accordingly, until such time that we can generate sufficient revenue from product sales or other sources, if ever, management expects to seek to raise any necessary additional capital through private or public equity or debt financings, loans or other capital sources, which could include income from collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. To the extent that we raise additional capital through equity financings or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting our ability to incur liens, issue additional debt, pay dividends, repurchase our own common stock, make certain investments or engage in merger, consolidation, licensing, or asset sale transactions. If we raise capital through collaborations, partnerships, and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. We may be unable to raise additional capital from these sources on favorable terms, or at all. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from recent bank failures. The failure to obtain sufficient capital on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including requiring us to delay, reduce or curtail our research, product development or future commercialization efforts. We may also be required to license rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Management cannot provide assurance that we will ever generate positive cash flow from operating activities.

Previous wording

We account for all convertible notes issued under the fair value option election of ASC 825. The financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment is recognized within other income (expense) in the accompanying condensed consolidated statements of operations and the portion of the fair value adjustment attributed to a change in the instrument-specific credit risk is recognized as a component of other comprehensive loss, if any. The fair value is based on significant inputs not observable in the market, namely potential financing scenarios, the likelihood of such scenarios, the expected time for each scenario to occur, and the required market rates of return utilized in modeling these scenarios.

Current wording

We account for all convertible notes issued under the fair value option election of ASC 825. The financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment is recognized within other income (expense), net in the accompanying condensed consolidated statements of operations and the portion of the fair value adjustment attributed to a change in the instrument-specific credit risk is recognized as a component of other comprehensive loss, if any. The fair value is based on significant inputs not observable in the market, namely potential financing scenarios, the likelihood of such scenarios, the expected time for each scenario to occur, and the required market rates of return utilized in modeling these scenarios.

Previous wording

Upon closing of the Merger, Legacy Q32 converted the outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a gain of $15.9 million on the change in fair value prior to the conversion of convertible notes is reflected in the condensed consolidated statement of operations for the six months ended June 30, 2024. We recorded a gain of $1.3 million related to the change in fair value of the Convertible Notes for the six months ended June 30, 2023.

Current wording

Upon closing of the Merger, Legacy Q32 converted the outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a gain of $15.9 million on the change in fair value prior to the conversion of the Convertible Notes is reflected in the condensed consolidated statement of operations for the nine months ended September 30, 2024. We recorded a loss of $5.0 million related to the change in fair value of the Convertible Notes for the nine months ended September 30, 2023.