Armata Pharmaceuticals Inc

Previous wording

Statements contained in this Quarterly Report that are not statements of historical fact are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements concerning product development plans, commercialization of our products, the expected market opportunity for our products, the use of bacteriophages and synthetic phages to kill bacterial pathogens, having resources sufficient to fund our operations into the third quarter of 2023, future funding sources, general and administrative expenses, clinical trial and other research and development expenses, costs of manufacturing, costs relating to our intellectual property, capital expenditures, the expected benefits of our targeted phage therapies strategy, the potential market for our products, tax credits and carry-forwards, and litigation-related matters. Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “will,” “goal,” “potential” and similar expressions are intended to identify forward-looking statements, though not all forward-looking statements necessarily contain these identifying words. These statements are subject to risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed on March 21, 2024 with the SEC, and under Item 1A, “Risk Factors” and elsewhere in this Quarterly Report. These forward-looking statements speak only as of the date on which they were made, and we undertake no obligation to update any forward-looking statements.

Current wording

Statements contained in this Quarterly Report that are not statements of historical fact are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements concerning product development plans, commercialization of our products, the expected market opportunity for our products, the use of bacteriophages and synthetic phages to kill bacterial pathogens, having resources sufficient to fund our operations into the first quarter of 2025, future funding sources, general and administrative expenses, clinical trial and other research and development expenses, costs of manufacturing, costs relating to our intellectual property, capital expenditures, the expected benefits of our targeted phage therapies strategy, the potential market for our products, tax credits and carry-forwards, and litigation-related matters. Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “will,” “goal,” “potential” and similar expressions are intended to identify forward-looking statements, though not all forward-looking statements necessarily contain these identifying words. These statements are subject to risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed on March 21, 2024 with the SEC, and under Item 1A, “Risk Factors” and elsewhere in this Quarterly Report. These forward-looking statements speak only as of the date on which they were made, and we undertake no obligation to update any forward-looking statements.

Previous wording

We are a clinical-stage biotechnology company focused on the development of pathogen-specific bacteriophage therapeutics for the treatment of antibiotic-resistant and difficult-to-treat bacterial infections using our proprietary bacteriophage-based technology. We see bacteriophages as an alternative to antibiotics and an essential response to the growing bacterial resistance to current classes of antibiotics. Bacteriophages or “phages” have a powerful and highly differentiated mechanism of action that enables binding to and killing of targeted bacteria while uniquely preserving the normal human microbiome or “healthy bacteria”. This is in direct contrast to traditional broad-spectrum antibiotics which can alter the human microbiome increasing susceptibility to opportunistic pathogens, such as C. difficile. We believe that phages represent a promising means to effectively treat bacterial infections as an alternative to broad- spectrum antibiotics, especially for patients with bacterial infections resistant to current standard of care therapies, including the multidrug-resistant or “superbug” strains of bacteria. We are a leading developer of phage therapeutics and believe we are uniquely positioned to address the growing worldwide threat of antibiotic-resistant bacterial infections. We are completing two critical Phase 2 trials to ensure a pathway towards pivotal Phase 3 trials.

Current wording

We are a clinical-stage biotechnology company focused on the development of high purity, pathogen-specific bacteriophage therapeutics for the treatment of antibiotic-resistant and difficult-to-treat bacterial infections using our proprietary bacteriophage-based technology. We see bacteriophages as an alternative to antibiotics and an essential response to the growing bacterial resistance to current classes of antibiotics. Bacteriophages or “phages” have a powerful and highly differentiated mechanism of action that enables binding to and killing of targeted bacteria while uniquely preserving the normal human microbiome or “healthy bacteria”. This is in direct contrast to traditional broad-spectrum antibiotics which can alter the human microbiome increasing susceptibility to opportunistic pathogens, such asC. difficile. We believe that phages represent a promising means to effectively treat bacterial infections as an alternative to broad- spectrum antibiotics, especially for patients with bacterial infections resistant to current standard of care therapies, including the multidrug-resistant or “superbug” strains of bacteria. We are a leading developer of broad phage therapeutics with high purity and believe we are uniquely positioned to address the growing worldwide threat of antibiotic-resistant bacterial infections. We are completing two critical Phase 2 trials to ensure a pathway towards pivotal Phase 3 trials.

Previous wording

We are combining our proprietary approach and expertise in identifying, characterizing and developing both naturally occurring and engineered (synthetic) bacteriophages with our proprietary phage-specific host-engineered cGMP manufacturing capabilities to advance a target pipeline of high-quality bacteriophage product candidates for advanced development. We believe we are uniquely advancing two lead candidates to address both chronic and acute bacterial infections.

Current wording

We are combining our proprietary approach and expertise in identifying, characterizing and developing both naturally occurring and engineered (synthetic) bacteriophages with our proprietary phage-specific host-engineered cGMP manufacturing capabilities to advance a target pipeline of high-quality bacteriophage product candidates for late-stage clinical development. We have spent the last 12 months further improving our manufacturing processes with the

Previous wording

Our first lead candidate focused primarily on chronic bacterial infections is the clinical phage candidate P. aeruginosa. On October 14, 2020, we received the approval to proceed from the U.S. Food and Drug Administration (the “FDA”) for our Investigational New Drug (“IND”) application for AP-PA02. In the first quarter of 2023, we announced positive topline results from the completed “SWARM-P.a.” study – a Phase 1b/2a, multicenter, double-blind, randomized, placebo-controlled, single ascending dose and multiple ascending dose clinical trial to evaluate the safety and tolerability of inhaled AP-PA02 in subjects with cystic fibrosis and chronic pulmonaryP. aeruginosainfection. Data indicate that AP-PA02 was well-tolerated with a treatment emergent adverse event profile similar to placebo. Pharmacokinetics findings confirm AP-PA02 can be effectively delivered to the lungs through nebulization with minimal systemic exposure, with single ascending doses and multiple ascending doses resulting in a proportional increase in exposure as measured in induced sputum. AP-PA02 exposures were generally consistent across patient subjects. Additionally, bacterial levels ofP. aeruginosain the sputum measured at several timepoints suggest improvement in bacterial load reduction for subjects treated with AP-PA02 at the end of treatment as compared to placebo after ten days of dosing. In addition, a correlation was seen between increasing phage dose (higher AP-PA02 exposures) and reduction in the bacterial load, supporting the biologic plausibility of a bacterial specific mechanism of action and creating the opportunity for phage as a therapeutic alternative to inhaled antibiotics. This study was supported by the Cystic Fibrosis Foundation, which granted us a Therapeutics Development Award of $5.0 million. As of March 31, 2024, we received the full award’s amount, including the final payment of $0.3 million in January 2024. Following the promising Phase 1b/2a results of favorable safety and tolerability profile and plausible mechanism of action, an additional confirmatory Phase 2 trial was initiated in non-cystic fibrosis Bronchiectasis (“NCFB”) patients with similar chronic pulmonary infections due toP. aeruginosa.

Current wording

Our first lead candidate focused primarily on chronic bacterial infections is the clinical phage candidateP. aeruginosa. On October 14, 2020, we received the approval to proceed from the U.S. Food and Drug Administration (the “FDA”) for our Investigational New Drug (“IND”) application for AP-PA02. In the first quarter of 2023, we announced positive topline results from the completed “SWARM-P.a.” study – a Phase 1b/2a, multicenter, double-blind, randomized, placebo-controlled, single ascending dose and multiple ascending dose clinical trial to evaluate the safety and tolerability of inhaled AP-PA02 in subjects with cystic fibrosis and chronic pulmonaryP. aeruginosainfection. Data indicate that AP-PA02 was well-tolerated with a treatment emergent adverse event profile similar to placebo. Pharmacokinetics findings confirm AP-PA02 can be effectively delivered to the lungs through nebulization with minimal systemic exposure, with single ascending doses and multiple ascending doses resulting in a proportional increase in exposure as measured in induced sputum. AP-PA02 exposures were generally consistent across patient subjects. Additionally, bacterial levels ofP. aeruginosain the sputum measured at several timepoints suggest improvement in bacterial load reduction for subjects treated with AP-PA02 at the end of treatment as compared to placebo after ten days of dosing. In addition, a correlation was seen between increasing phage dose (higher AP-PA02 exposures) and reduction in the bacterial load, supporting the biologic plausibility of a bacterial specific mechanism of action and creating the opportunity for phage as a therapeutic alternative to inhaled antibiotics. This study was supported by the Cystic Fibrosis Foundation, which granted us a Therapeutics Development Award of $5.0 million. As of June 30, 2024, we received the full award’s amount, including the final payment of $0.3 million in January 2024. Following the promising Phase 1b/2a results of favorable safety and tolerability profile and plausible mechanism of action, an additional confirmatory Phase 2 trial was initiated in non-cystic fibrosis Bronchiectasis (“NCFB”) patients with similar chronic pulmonary infections due toP. aeruginosa.

Previous wording

On February 22, 2022, we announced FDA approval to proceed with our IND application for AP-PA02, in a second indication, NCFB. We initiated a Phase 2 trial (“Tailwind”) in NCFB in 2022 and reported first patient dosing in the first quarter of 2023. The “Tailwind” study is a Phase 2, multicenter, double-blind, randomized, placebo-controlled study to evaluate the safety, phage kinetics, and efficacy of inhaled AP-PA02 phage therapeutic in subjects with NCFB and chronic pulmonary P.aeruginosa infection. The trial design includes two cohorts. One cohort enrolls subjects not on chronic inhaled antibiotics, randomized to receive either inhaled AP-PA02 or placebo. The other cohort enrolls subjects on chronic inhaled antibiotics, randomized to receive either inhaled AP-PA02 plus their chronic inhaled antibiotic or placebo plus their chronic inhaled antibiotic. This study will analyze AP-PA02 as monotherapy as well as AP-PA02 in combination with inhaled antibiotics. We are actively accelerating enrollment (currently approximately 70% enrolled) at increased AP-PA02 dose levels, and potentially extending duration of therapy, as allowed with the current protocol design. The aim of the study is to define a safe dose and dosing duration with promising biologic correlation in anticipation for a definitive Phase 3 trial in 2025. We plan to evaluate inhaled AP-PA02 as an alternative to inhaled antibiotics in chronic pulmonary P.aeruginosa infections in subjects with NCFB. As there are no FDA approved anti-infective treatments for NCFB, a definitive pivotal placebo-controlled trial is plausible, providing a pathway to commercialization, pending positive results.

Current wording

On February 22, 2022, we announced FDA approval to proceed with our IND application for AP-PA02, in a second indication, NCFB. We initiated a Phase 2 trial (“Tailwind”) in NCFB in 2022 and reported first patient dosing in the first quarter of 2023. The “Tailwind” study is a Phase 2, multicenter, double-blind, randomized, placebo-controlled study to evaluate the safety, phage kinetics, and efficacy of inhaled AP-PA02 phage therapeutic in subjects with NCFB and chronic pulmonaryP. aeruginosa infection. The trial design includes two cohorts in order to analyze AP-PA02 as monotherapy as well as AP-PA02 in combination with inhaled antibiotics. One cohort enrolls subjects not on chronic inhaled antibiotics, randomized to receive either inhaled AP-PA02 or placebo. The other cohort enrolls subjects on chronic inhaled antibiotics, randomized to receive either inhaled AP-PA02 plus their chronic inhaled antibiotic or placebo plus their chronic inhaled antibiotic. The aim of the study is to define a safe dose and dosing duration with promising biologic correlation in anticipation for a definitive Phase 3 trial in 2025. On July 11, 2024, we announced completion of enrollment of the Phase 2 TailwindStudy. The last patient final follow-up visit took place on August 7, 2024. We anticipate topline data from the Tailwind study in the second half of 2024, followed by potential initiation of a pivotal bronchiectasis trial in 2025 in which we plan to evaluate inhaled AP-PA02 as an alternative to inhaled antibiotics in chronic pulmonaryP. aeruginosa infections in subjects with NCFB. As there are no FDA approved anti-infective treatments for NCFB, a definitive pivotal placebo-controlled trial is plausible, providing a pathway to commercialization, pending positive clinical trial results.

Previous wording

In parallel, we have an acute bacterial infection clinical development plan focused on Staphylococcus aureus (“S. aureus”) bacteremia, a difficult-to-treat and often life-threatening human infections that can result in high morbidity and mortality and for which bacterial resistance to antibiotics is growing.

Current wording

In parallel, we have an acute bacterial infection clinical development plan focused onStaphylococcus aureus (“S. aureus”) bacteremia, a difficult-to-treat and often life-threatening human infection that can result in high morbidity and mortality and for which bacterial resistance to antibiotics is growing.

Previous wording

A key advantage of our phage manufacturing expertise is the purity profiles of our phage products, including AP-SA02, our phage product candidate for S. aureus; this has enabled us to pursue treatment of complicated S. aureus bacteremia, where repetitive intravenous dosing is required. On June 15, 2020, we entered into an agreement (the “MTEC Agreement”) with the Medical Technology Enterprise Consortium (“MTEC”), pursuant to which we expect to receive a $15.0 million grant and entered into a three-year program administered by the U.S Department of Defense through MTEC with funding from the Defense Health Agency and Joint Warfighter Medical Research Program. On September 29, 2022, the MTEC Agreement was modified to increase the total award by $1.3 million to $16.3 million and extend the term into the second half of 2024. The grant is being used to partially fund a Phase 1/2, multi-center, randomized, double-blind, placebo- controlled dose escalation study that will assess the safety, tolerability, and efficacy of our phage-based candidate, AP-SA02, for the treatment of adults with S. aureus bacteremia.

Current wording

A key advantage of our phage manufacturing expertise is the purity profiles of our phage products, including AP-SA02, our phage product candidate forS. aureus; this has enabled us to pursue treatment of complicatedS. aureus bacteremia, where repetitive intravenous dosing is required. On June 15, 2020, we entered into an agreement (the “MTEC Agreement”) with the Medical Technology Enterprise Consortium (“MTEC”), pursuant to which we received a $15.0 million grant and entered into a multi-year program administered by the U.S Department of Defense through MTEC and managed by the Naval Medical Research Command (NMRC – Naval Advanced Medical Development) with funding from the Defense Health Agency and Joint Warfighter Medical Research Program. On September 29, 2022, the MTEC Agreement was modified to increase the total award by $1.3 million to $16.3 million and extend the term into the second half of 2024. In July 2024, the MTEC Agreement was modified to increase the total award by $5.3 million to

Previous wording

evaluating safety with higher intravenous doses, which is possible due to the high purity of our phage product candidates. Currently the trial is over 50% enrolled. We are committed to developing a definitive efficacy trial in 2025 focused on phage as an alternative to broad-spectrum antibiotics and/or antibiotic sparing to decrease the utilization of broad-spectrum antibiotics and their detrimental impact on the normal human microbiome.

Current wording

On November 17, 2021, we announced that we had received from the FDA the approval to proceed for our IND application for AP-SA02. We are focused on accelerating enrollment of the Phase 2a segment of the “diSArm” study, evaluating safety with higher intravenous doses, which is possible due to the high purity of our phage product candidates. Currently the trial is over 60% enrolled. We are committed to developing a definitive efficacy trial in 2025 focused on phage as an alternative to broad-spectrum antibiotics and/or antibiotic sparing to decrease the utilization of broad-spectrum antibiotics and their detrimental impact on the normal human microbiome.

Previous wording

On August 1, 2022, we announced FDA approval to proceed with our IND application for AP-SA02, in a second indication, prosthetic joint infections (“PJI”) withS. aureus. We had planned to initiate a Phase 1b/2a trial in 2023; however in light of the growing concerns of both PJI and wound infection, we are revising the protocol to include both indications. Driven by data from the bacteremia study, and with sufficient funding, we may in the future initiate a Phase 1b/2a trial to assess the safety and tolerability of intravenous and intra-articular AP-SA02 as an adjunct to standard of care antibiotics in adults undergoing treatment of periprosthetic joint infections and/or wound infections caused by S. aureus.

Current wording

On August 1, 2022, we announced FDA approval to proceed with our IND application for AP-SA02 in a second indication, prosthetic joint infections (“PJI”) withS. aureus. We had planned to initiate a Phase 1b/2a trial in 2023; however, in light of the growing concerns of both PJI and wound infection, we are revising the protocol to include both indications. Driven by data from the bacteremia study, and with sufficient funding, we may in the future initiate a Phase 1b/2a trial to assess the safety and tolerability of intravenous and intra-articular AP-SA02 as an adjunct to standard of care antibiotics in adults undergoing treatment of periprosthetic joint infections and/or wound infections caused byS. aureus.

Previous wording

We have incurred net losses since our inception and our operations to date have been primarily limited to research and development and raising capital. As of March 31, 2024, we had an accumulated deficit of $333.8 million. We currently expect to use our existing cash for the focused research and development of our current product candidates and for working capital and other general corporate purposes. We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the development and seeking to obtain regulatory approval of our product candidates. We do not expect to generate product revenue unless and until we successfully complete development and obtain marketing approval for at least one of our product candidates. We may also use a portion of our existing cash for the potential acquisition of, or investment in, product candidates, technologies, formulations or companies that complement our business, although we have no current understandings, commitments or agreements to do so.

Current wording

We have incurred net losses since our inception and our operations to date have been primarily limited to research and development and raising capital. As of June 30, 2024, we had an accumulated deficit of $324.9 million. We currently expect to use our existing cash and cash equivalents for the focused research and development of our current product candidates and for working capital and other general corporate purposes. We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the development of and seeking to obtain regulatory approval for our product candidates. We do not expect to generate product revenue unless and until we successfully complete development and obtain marketing approval for at least one of our product candidates. We may also use a portion of our existing cash and cash equivalents for the potential acquisition of, or investment in, product candidates, technologies, formulations or companies that complement our business, although we have no current understandings, commitments or agreements to do so.

Previous wording

Our existing cash of $37.9 million as of March 31, 2024 will not be sufficient to enable us to complete all necessary development of any potential product candidates. Accordingly, we will be required to obtain further funding through one or more other public or private equity offerings, debt financings, collaboration, strategic financing, grants or government contract awards, licensing arrangements or other sources. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and potential disruptions to, and volatility in, financial markets in the United States and worldwide. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on acceptable terms, we may be required to defer, reduce or eliminate significant planned expenditures, restructure, curtail or eliminate some or all of our development programs or other operations, dispose of assets, enter into arrangements that may require us to relinquish rights to certain of our product candidates, technologies or potential markets, file for bankruptcy or cease operations altogether. Any of these events could have a material adverse effect on our business, financial condition and results of operations and result in a loss of investment by our stockholders.

Current wording

Our existing cash and cash equivalents of $26.4 million as of June 30, 2024 will not be sufficient to enable us to complete all necessary development of any potential product candidates. Accordingly, we will be required to obtain further funding through one or more other public or private equity offerings, debt financings, collaboration, strategic financing, grants or government contract awards, licensing arrangements or other sources. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and potential disruptions to, and volatility in, financial markets in the United States and worldwide. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on acceptable terms, we may be

Previous wording

Comparison of three months ended March 31, 2024 and 2023

Current wording

Comparison of three and six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

We recognized $1.0 million and $0.8 million of grant revenue during the three months ended March 31, 2024 and 2023, respectively, which represents MTEC’s share of the costs incurred for our AP-SA02 program for the treatment ofS.aureus bacteremia.

Current wording

Our grant revenue represents MTEC’s share of the costs incurred for our AP-SA02 program for the treatment ofS. aureus. The full amount of the MTEC award of $16.3 million was utilized as of March 31, 2024 and no grant revenue was recognized during the three months ended June 30, 2024. In July 2024, we amended our MTEC agreement and increased the amount of the award by $5.3 million to a total of $21.6 million. We will recognize grant revenue from the third quarter of 2024 until the full amount of the amended award is utilized. We recognized $1.0 million of grant revenue during the three months ended June 30, 2023, and $1.0 million and $1.8 million during the six months ended June 30, 2024 and 2023, respectively, related to the MTEC award.

Previous wording

The following table summarize our research and development expenses for the three months ended March 31, 2024 and 2023:

Current wording

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

Previous wording

Research and development expenses decreased by $1.6 million, from $9.6 million for the three months ended March 31, 2023 to $8.0 million for the three months ended March 31, 2024.

Current wording

Research and development expenses decreased by $1.4 million, from $17.9 million for the six months ended June 30, 2023 to $16.5 million for the six months ended June 30, 2024.

Previous wording

Clinical trial costs decreased by $0.8 million, from $2.5 million for the three months ended March 31, 2023, to $1.7 million for the three months ended March 31, 2024. The decrease is primarily due to a decrease in AP-PA02 Cystic Fibrosis study costs of $0.7 million as this study was completed during 2024; a decrease in AP-SA02 Bacteremia study costs of $0.7 million due to a credit of $0.8 million received from a clinical research organization for prior incurred costs as we negotiated an amended statement of work with the clinical research organization in March 2024; and a decrease in AP-SA02 Prosthetic Joint Infection study costs of $0.2 million as this work was completed during 2024 year, partially offset by an increase in AP-PA02 Non-Cystic Fibrosis Bronchiectasis study clinical related costs of $0.9 million.

Current wording

Clinical trial costs decreased by $0.2 million, from $4.5 million for the six months ended June 30, 2023, to $4.3 million for the six months ended June 30, 2024. The decrease is primarily due to a decrease of $0.9 million in AP-PA02 Cystic Fibrosis trial costs, $0.5 million in Bacteremia trial costs and $0.3 million in AP-SA02 Prosthetic Joint Infection trial costs, offset by an increase of $1.5 million in the AP-PA02 Non-Cystic Fibrosis Bronchiectasis trial costs. AP-PA02 Cystic Fibrosis and AP-SA02 Prosthetic Joint Infection trials are substantially completed and study reconciliations are in process. Bacteremia trial costs decreased due to a credit of $0.8 million received from a clinical research organization for prior incurred costs as we negotiated an amended statement of work with the clinical research organization in March 2024, offset by an increase of $0.3 million during the six months ended June 30, 2024. The AP-PA02 Non-Cystic Fibrosis Bronchiectasis trial costs increased as we completed our patients’ enrollment in July 2024.

Previous wording

Other external research and development costs decreased by $0.3 million from $1.2 million for the three months ended March 31, 2023, to $0.9 million for the three months ended March 31, 2024. The change is a result of a decrease of $0.2 million in laboratory supplies purchases and a decrease of $0.1 million in research and development consulting services.

Current wording

Other external research and development costs decreased by $0.2 million from $1.1 million for the three months ended June 30, 2023, to $0.9 million for the three months ended June 30, 2024. The change is primarily due to a decrease of $0.3 million in consulting expenses, offset by an increase of less than $0.1 million in clinical supplies shipping costs.

Previous wording

Our expenses by product and by project for the three months ended March 31, 2024 and 2023 were as follows:

Current wording

Our expenses by product and by project for the three months ended June 30, 2024 and 2023 were as follows (in thousands):

Previous wording

Expenses not allocated by projects include consultants, lab supplies and outsource service expenses

Current wording

Expenses not allocated by projects include consultants, lab supplies and outsourced services expenses.

Previous wording

Facilities and overheads increased in the three months ended March 31, 2024 compared to the 2023 period by $0.3 million. The main factor driving the increase is related to expenses related to our operating leases.

Current wording

Facilities and overheads increased by $0.2 million for the six months ended June 30, 2024 compared to the 2023 period, as a result of an increase in expenses related to our McConnell leased facility.

Previous wording

General and administrative expenses were $3.2 million and $2.6 million for the three months ended March 31, 2024 and 2023, respectively. The increase of $0.6 million is primarily related to an increase of $ 0.3 million in legal, accounting and other consulting expenses, an increase of $0.1 million in lease expenses, and an increase in other facilities and overhead expenses of $0.2 million.

Current wording

General and administrative expenses were $6.6 million and $4.9 million for the six months ended June 30, 2024 and 2023, respectively. The increase of $1.7 million is primarily related to an increase of $1.1 million in stock-based compensation expense due to stock-based awards granted during the first quarter of 2024, an increase of $0.3 million in legal, accounting and other consulting expenses, an increase of $0.2 million in expenses related to our McConnell leased facility and an increase of $0.1 million in other facilities and overhead expenses.

Previous wording

Interest income for the three months ended March 31, 2024, and 2023 was less than $0.1 million, and related to interest income on our cash balances.

Current wording

Interest income for the three months ended June 30, 2024 and 2023 was $0.2 million and less than $0.1 million, respectively, and related to interest income on our money market fund investments.

Previous wording

We recognized interest expense for the three months ended March 31, 2024, of $1.8 million related to the interest expenses and the amortization of debt discount and issuance costs for the 2023 Loan and 2024 Loan received from Innoviva in July 2023 and March 2024, respectively. Interest expense is accrued and is payable at the maturity of the 2023 Loan and the 2024 Loan in 2025.

Current wording

We recognized interest expense of $2.7 million for the three months ended June 30, 2024, related to the interest expenses and the amortization of debt discount and issuance costs for the 2023 Loan and 2024 Loan received from Innoviva in July 2023 and March 2024, respectively. Stated interest is accrued and is payable at the maturity of the 2023 Loan and the 2024 Loan in 2025.

Previous wording

We recognized a loss on change in the fair value of the Convertible Loan for the three months ended March 31, 2024, and 2023 of $13.2 million and $3.2 million, respectively. The Convertible Loan received from Innoviva in January 2023 and amended in July 2023 is accounted at fair value using a weighted probability of various settlement scenarios of the Convertible Loan during its term discounted to each reporting date. Conversion option scenarios are valued using an option pricing model with significant assumptions and estimates such as volatility, expected term and risk-free interest rates.

Current wording

changes in volatilities. The Convertible Loan received from Innoviva in January 2023 and amended in July 2023 is accounted for at fair value using a weighted probability of various settlement scenarios of the Convertible Loan during its term discounted to each reporting date. Conversion option scenarios are valued using an option pricing model with significant assumptions and estimates such as volatility, expected term and risk-free interest rates.

Previous wording

We have incurred net losses since our inception and have negative operating cash flows. Our cash of $37.9 million as of March 31, 2024, will not be sufficient to fund our operations for the next 12 months from the date of issuance of our condensed consolidated financial statements for the three months ended March 31, 2024. We plan to control our expenses and to raise additional capital through a combination of public and private equity, debt financings, strategic alliances, and grant arrangements. These circumstances raise substantial doubt about our ability to continue as a going concern. While management believes this plan to raise additional funds will alleviate the conditions that raise substantial doubt, these plans are not entirely within its control and cannot be assessed as being probable of occurring. We may not be able to secure additional financing in a timely manner or on favorable terms, if at all.

Current wording

We have incurred net losses since our inception and have negative operating cash flows. Our cash and cash equivalents of $26.4 million as of June 30, 2024 will not be sufficient to fund our operations for the next 12 months from the date of issuance of our condensed consolidated financial statements for the six months ended June 30, 2024. We plan to control our expenses and to raise additional capital through a combination of public and private equity, debt financings, strategic alliances, and grant arrangements. These circumstances raise substantial doubt about our ability to continue as a going concern. While management believes this plan to raise additional funds will alleviate the conditions that raise substantial doubt, these plans are not entirely within its control and cannot be assessed as being probable of occurring. We may not be able to secure additional financing in a timely manner or on favorable terms, if at all.

Previous wording

Convertible Credit Agreement and the 2023 Credit Agreement to, among other things, conform certain terms relating to permitted indebtedness and permitted liens. The 2024 Loan bears 14% annual interest rate and matures in June 2025. Principal and accrued interest are payable at maturity.

Current wording

On March 4, 2024, we entered into the 2024 Credit Agreement for the 2024 Loan in an aggregate amount of $35.0 million with Innoviva. Concurrently with the execution of the 2024 Loan, we amended certain provisions of the Convertible Credit Agreement and the 2023 Credit Agreement to, among other things, conform certain terms relating to permitted indebtedness and permitted liens. The 2024 Loan bears interest at an annual rate of 14% and matures in June 2025. Principal and accrued interest are payable at maturity.

Previous wording

Any additional fundraising efforts may divert our management team from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Our ability to raise additional funds will depend, in part, on the success of our product development activities, including our targeted phage therapies strategy and any clinical trials we initiate, regulatory events, our ability to identify and enter into in-licensing or other strategic arrangements, and other events or conditions that may affect our value or prospects, as well as factors related to financial, economic and market conditions, many of which are beyond our control. We cannot be certain that sufficient funds will be available to us when required or on acceptable terms. If we are unable to secure additional funds on a timely basis or on acceptable terms, we may be required to defer, reduce or eliminate significant planned expenditures, restructure, curtail or eliminate some or all of our development programs or other operations, dispose of technology or assets, pursue an acquisition of our company by a third party at a price that may result in a loss on investment for our stockholders, enter into arrangements that may require us to relinquish rights to certain of our product candidates, technologies or potential markets, file for bankruptcy or cease operations altogether. Any of these events could have a material adverse effect on our business, financial condition and results of operations, increase the risk of insolvency and loss of investment by our stockholders. To the extent that additional capital is raised through the sale of equity or

Current wording

Any additional fundraising efforts may divert our management team from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Our ability to raise additional funds will depend, in part, on the success of our product development activities, including our targeted phage therapies strategy and any clinical trials we initiate, regulatory events, our ability to identify and enter into in-licensing or other strategic arrangements, and other events or conditions that may affect our value or prospects, as well as factors related to financial, economic and market conditions, many of which are beyond our control. We cannot be certain that sufficient funds will be available to us when required or on acceptable terms. If we are unable to secure additional funds on a timely basis or on acceptable terms, we may be required to defer, reduce or eliminate significant planned expenditures, restructure, curtail or eliminate some or all of our development programs or other operations, dispose of technology or assets, pursue an acquisition of our company by a third party at a price that may result in a loss on investment for our stockholders, enter into arrangements that may require us to relinquish rights to certain of our product candidates, technologies or potential markets, file for bankruptcy or cease operations altogether. Any of these events could have a material adverse effect on our business, financial condition and results of operations, increase the risk of insolvency and loss of investment by our stockholders. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution to our existing stockholders. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the United States and worldwide.

Previous wording

The following table summarizes our sources and uses of cash for the periods presented:

Current wording

The following table summarizes our sources and uses of cash for the periods presented (in thousands):

Previous wording

Net cash used in operating activities was $10.6 million and $17.6 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Net cash used in operating activities was $20.8 million and $29.6 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Cash used in operating activities in the three months ended March 31, 2024 was primarily due to our net loss for the period of $25.0 million, adjusted by non-cash items of $16.1 million and a decrease of $1.7 million in our net operating assets and liabilities. The non-cash items consist of $13.0 million related to a loss from change in fair value of convertible debt, $1.8 million of non-cash interest expense on the 2023 Loan and 2024 Loan, $0.5 million related to stock-based compensation expense, $0.3 million related to depreciation and amortization expense and $0.5 million related to change in right-of-use asset. The decrease in our net operating assets and liabilities was primarily due to a decrease of $2.2 million in operating lease liability, which primarily relates to payments to the construction of office and laboratory and manufacturing space at our new leased facility in Los Angeles, CA, which we expect to complete by mid-2024, a decrease of $1.5 million in accounts payable and accrued liabilities, an increase of $0.2 million in accrued compensation, and an increase of $1.8 million in prepaid expenses and other current assets.

Current wording

stock-based compensation expense, $1.0 million related to change in right-of-use asset and $0.6 million related to depreciation and amortization expense. The decrease in our net operating assets and liabilities was primarily due to a decrease of $3.2 million in operating lease liability related to lease payments and payments for the construction of office and laboratory and manufacturing space at our new leased facility in Los Angeles, CA, a decrease of $2.1 million in accounts payable and accrued liabilities, an increase of $0.5 million in accrued compensation, and an increase of $2.6 million in prepaid expenses and other current assets.

Previous wording

Cash used in operating activities in the three months ended March 31, 2023, was primarily due to our net loss for the period of $14.5 million, adjusted by non-cash net loss of $4.2 million and a net change of $7.3 million in our net operating assets and liabilities. The non-cash amounts consisted of $3.2 million related to a loss from change in fair value of convertible debt, $0.9 million related to stock-based compensation expense and $0.2 million related to depreciation and amortization expense. The changes in our net operating assets and liabilities were primarily due to a decrease of $3.7 million in operating lease liability, a decrease of $0.9 million in accrued compensation, a decrease of $1.3 million in accounts payable and accrued liabilities, and a decrease of $1.4 million in prepaid expenses and other current assets.

Current wording

Cash used in operating activities in the six months ended June 30, 2023, was primarily due to our net loss for the period of $18.0 million, adjusted by non-cash net loss of $1.3 million and a net change of $10.3 million in our net operating assets and liabilities. The non-cash amounts consisted of $2.9 million related to a gain from change in fair value of convertible debt, $1.1 million related to stock-based compensation expense and $0.5 million related to depreciation and amortization expense. The changes in our net operating assets and liabilities were primarily due to a decrease of $7.5 million in operating lease liability, a decrease of $0.7 million in accrued compensation, an increase of $0.1 million in accounts payable and accrued liabilities, and a decrease of $2.2 million in prepaid expenses and other current assets.

Previous wording

Net cash used in investing activities was $0.3 million and $2.0 million for the three months ended March 31, 2024 and 2023 respectively, which is attributable to purchases of laboratory and manufacturing equipment in connection with the construction of a new office, laboratory and manufacturing space at our leased facility in Los Angeles, CA.

Current wording

Net cash used in investing activities was $1.6 million and $2.2 million for the six months ended June 30, 2024 and 2023, respectively, which is attributable to purchases of laboratory and manufacturing equipment in connection with the construction of a new office, laboratory and manufacturing space at our leased facility in Los Angeles, CA.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2024 was $34.9 million, which consisted primarily of proceeds from issuance of long-term debt, net of issuance costs of less than $0.1 million, and proceeds from exercise of stock options of less than $0.1 million.

Current wording

Cash provided by financing activities for the six months ended June 30, 2024 was $34.9 million, which consisted primarily of proceeds from issuance of long-term debt, net of issuance costs of less than $0.1 million, and proceeds from exercise of stock options of less than $0.1 million.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2023 was $29.6 million, which consisted primarily of proceeds from issuance of convertible debt, net of issuance costs.

Current wording

Cash provided by financing activities for the six months ended June 30, 2023 was $29.2 million, which consisted primarily of proceeds from issuance of convertible debt, net of issuance costs.