Aerovate Therapeutics Inc

Previous wording

On April 5, 2023, we entered into an ATM Equity Offering SM Sales Agreement, or the Sales Agreement, with BofA Securities, Inc., or the Agent, pursuant to which we established an “at-the-market” offering program, or ATM Program, to sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. As of March 31, 2024, 2,662,721 shares were sold under the ATM Program, generating $44.3 million of net proceeds after deducting Agent commissions and other offering costs. In April 2024, we sold additional shares of our common stock for net proceeds of $23.6 million, after deducting Agent commissions and other offering costs. As of the date of this Quarterly Report on Form 10-Q, approximately $6.0 million of shares remain available for sale from time to time under our ATM Program.

Current wording

On April 5, 2023, we entered into an ATM Equity Offering SM Sales Agreement, or the Sales Agreement, with BofA Securities, Inc., or the Agent, pursuant to which we established an “at-the-market” offering program, or ATM Program, to sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. As of June 30, 2024, 3,462,721 shares have been sold under the Sales Agreement, generating $67.9 million of net proceeds after deducting commissions to the Agent and other offering costs. As of the date of this Quarterly Report on Form 10-Q, up to $6.0 million of shares of our common stock remain available for sale from time to time under the Sales Agreement.

Previous wording

We currently have no products approved for sale, and we have not generated any revenue to date. In the future, we may generate revenue from collaboration or license agreements we may enter into with respect to our drug candidate, as well as product sales from any approved product, which approval we do not expect to occur for at least the next several years, if ever. Our ability to generate product revenue will depend on the successful development and eventual commercialization of AV-101 and any other drug candidates we may pursue. If we fail to complete the development of AV-101 in a timely manner, or to obtain regulatory approval, our ability to generate future revenue and our results of operations and financial position would be materially adversely affected.

Current wording

We currently have no products approved for sale, and we have not generated any revenue to date. At this time, we do not intend to resume development of AV-101 or any other product candidates, and as a result, we currently do not anticipate generating revenue. Our ability to generate product revenue will depend on the successful development and eventual commercialization of any future drug candidates we may pursue. If we do not resume development activities or if we resume development but fail to obtain regulatory approval for any future drug candidates, our ability to generate future revenue and our results of operations and financial position would be materially adversely affected.

Previous wording

To date, our research and development expenses have related to the development of AV-101. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

Current wording

Prior to mid-June, our research and development expenses have related to the development of AV 101. Since our decision to halt further development of AV-101, we have also incurred costs related to shutting down our clinical trials and research and development operations. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

Previous wording

General and administrative expenses consist primarily of personnel-related costs, including salaries, payroll taxes, employee benefits, and stock-based compensation charges for those individuals in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. We anticipate that our general and administrative expenses will increase for the foreseeable future to support our continued research and development activities, pre-commercial preparation activities and commercialization activities for AV-101. We also anticipate increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs associated with operating as a public company.

Current wording

General and administrative expenses consist primarily of personnel-related costs, including salaries, payroll taxes, employee benefits, stock-based compensation and severance charges for those individuals in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. We anticipate that our general and administrative expenses will decrease for the second half of 2024 as we decrease the size of our organization in connection with the Workforce Reduction Plan. Our future general and administrative expenses will be significantly dependent on the outcome of our strategic review process, related audit and legal expenses and whether we decide to pursue any future product development efforts.

Previous wording

General and administrative expenses for the three months ended March 31, 2024 were $4.5 million compared to $4.2 million for the three months ended March 31, 2023. The increase of $0.4 million was primarily due to a $0.7 million increase in headcount related costs, and a $0.1 million increase in other miscellaneous costs, partially offset by a $0.2 million decrease in other insurance costs, and a $0.2 million decrease in other consulting costs.

Current wording

General and administrative expenses for the three months ended June 30, 2024 were $4.9 million compared to $4.3 million for the three months ended June 30, 2023. The increase of $0.6 million was primarily due to a $0.3 million increase in headcount related costs, $0.4 million increase in travel and other miscellaneous costs, partially offset by a decrease of $0.1 million in insurance costs.

Previous wording

Other income for the three months ended March 31, 2024 was $1.4 million compared to $1.1 million for the three months ended March 31, 2023. The change of $0.3 million was due to interest earned on our cash and cash equivalents and short-term investments for the three months ended March 31, 2024.

Current wording

Other income for the three months ended June 30, 2024 was $1.4 million compared to $1.3 million for the three months ended June 30, 2023. The increase of $0.1 million was due to interest earned on our cash and cash equivalents and short-term investments for the three months ended June 30, 2024.

Previous wording

Research and development expenses for the three months ended March 31, 2024 were $20.1 million compared to $13.5 million for the three months ended March 31, 2023. The increase of $6.6 million was primarily due to our ongoing Phase 2b/Phase 3 trial causing increases of $3.5 million in manufacturing costs, $2.4 million in headcount related costs, and $0.6 million in pre-clinical and regulatory related costs. The remaining increase is attributable to travel and other miscellaneous costs.

Current wording

Research and development expenses for the six months ended June 30, 2024 were $41.3 million compared to $29.5 million for the six months ended June 30, 2023. The increase of $11.8 million was primarily due to our Phase 2b/Phase 3 trial causing increases of $5.0 million contract manufacturing costs, $4.6 million in headcount related costs, $1.3 million in travel and other miscellaneous costs, $0.4 million in clinical trial costs, and $0.5 million in regulatory and preclinical costs.

Previous wording

On April 5, 2023, we entered into an ATM Equity Offering SM Sales Agreement, or the Sales Agreement, with BofA Securities, Inc., or the Agent, pursuant to which we can sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. As of March 31, 2024, 2,662,721 shares were sold under the ATM Program, generating approximately $44.3 million of net proceeds after deducting Agent commissions and other offering costs. In April 2024, we sold additional shares of our common stock for net proceeds of $23.6 million, after deducting Agent commissions and other offering costs. As of the date of this Quarterly Report on Form 10-Q, approximately $6.0 million of shares remain available for sale from time to time under our ATM Program.

Current wording

On April 5, 2023, we entered into the Sales Agreement with the Agent, pursuant to which we can sell, from time to time, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. As of June 30, 2024, 3,462,721 shares have been sold under the Sales Agreement, generating $67.9 million of net proceeds after deducting commissions to the Agent and other offering costs. As of the date of this Quarterly Report on Form 10-Q, up to $6.0 million of shares of our common stock remain available for sale from time to time under the Sales Agreement.

Previous wording

As of March 31, 2024, we had cash and cash equivalents and short-term investments of $99.3 million, before the additional net proceeds in April 2024 of $23.6 million from our ATM Program. We expect our existing cash, cash equivalents and short-term investments, will be sufficient to fund our planned operations into 2026 based upon our current operating plans. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Current wording

As of June 30, 2024, we had cash and cash equivalents and short-term investments of $104.2 million. We expect our existing cash and cash equivalents and short-term investments will be sufficient to fund our operations for at least twelve months from the date of filing this Quarterly Report on Form 10-Q. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Previous wording

Until such time, if ever, as we can generate substantial product revenue to support our cost structure, we expect to finance our cash needs through equity offerings, debt financings, or other capital sources, potentially including collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity 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, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our drug candidates even if we would otherwise prefer to develop and market such drug candidates ourselves.

Current wording

If we resume development activities, we expect to finance our cash needs through equity offerings, debt financings, or other capital sources, potentially including collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity 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, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our drug candidates even if we would otherwise prefer to develop and market such drug candidates ourselves.

Previous wording

The following table sets forth a summary of the net cash flow activity for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

The following table sets forth a summary of the net cash flow activity for the six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

Net cash used in operating activities for the three months ended March 31, 2023 was $11.4 million, consisting primarily of our net loss incurred during the period of $16.5 million adjusted for non-cash charges of $2.4 million for stock-based compensation expense, $0.7 million of accretion on investments, and $3.4 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $2.8 million increase in accounts payable and accrued and other current liabilities, and a $0.6 million decrease in prepaid expenses.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was $44.1 million, consisting primarily of our net loss incurred during the period of $48.0 million adjusted for non-cash charges of $8.1 million for stock-based compensation expense, $1.5 million of accretion on investments, $0.1 million of depreciation expense, and $2.9 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $4.8 million increase in prepaid expenses, a $2.5 million decrease in other assets, a $0.7 million decrease in accounts payable and accrued and other current liabilities, and a $0.1 million decrease in other long term liabilities.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was $23.7 million, consisting primarily of our net loss incurred during the period of $23.2 million adjusted for non-cash charges of $4.2 million for stock-based compensation expense, $0.8 million of accretion on investments, and $3.9 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $2.1 million increase in prepaid expenses, a $0.4 million increase in other long term liabilities, and a $2.2 million decrease in accounts payable and accrued and other current liabilities.

Current wording

Net cash used in operating activities for the six months ended June 30, 2023 was $26.4 million, consisting primarily of our net loss incurred during the period of $35.5 million adjusted for non-cash charges of $5.4 million for stock-based compensation expense, $1.3 million of accretion on investments, and $5.0 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $5.4 million increase in accounts payable and accrued and other current liabilities, a $0.1 million decrease in other assets, a $0.2 million decrease in other liabilities and a $0.1 million decrease in prepaid expenses.

Previous wording

Net cash provided by investing activities for the three months ended March 31, 2024 of $8.8 million was comprised of purchases of short-term investments of $14.8 million, offset by maturities of short-term investments of $23.6 million.

Current wording

Net cash provided by investing activities for the six months ended June 30, 2024 of $26.8 million was comprised of purchases of short-term investments of $14.8 million, offset by maturities of short-term investments of $41.6 million.

Previous wording

Net cash provided by investing activities for the three months ended March 31, 2023 of $15.4 million was comprised of purchases of short-term investments of $15.6 million, offset by maturities of short-term investments of $31.0 million.

Current wording

Net cash provided by investing activities for the six months ended June 30, 2023 of $19.4 million was comprised of purchases of short-term investments of $48.3 million, $0.1 million for purchases of property and equipment, offset by maturities of short-term investments of $67.8 million.

Previous wording

assumptions that affect the reported amounts of assets, liabilities, expenses and the related disclosures of contingent liabilities in our consolidated financial statements and accompanying notes. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and judgments on an ongoing basis. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

Current wording

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and the related disclosures of contingent liabilities in our consolidated financial statements and accompanying notes. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and judgments on an ongoing basis. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

Previous wording

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2024, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.

Current wording

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2024, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.