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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________________________________________________
FORM 10-Q
___________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-36579
___________________________________________________________________
Adverum Biotechnologies, Inc.
(Exact name of registrant as specified in its charter)
___________________________________________________________________
Delaware
20-5258327
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
800 Saginaw Drive,
Redwood City, CA
(Address of principal executive offices)
94063
(Zip Code)
(650) 656-9323
(Registrant’s telephone number, including area code)
___________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Common Stock, $0.0001 par value
ADVM
The Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
x
Non-accelerated filer
¨
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
As of August 3, 2020, there were 80,656,651 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.



Table of Contents
Adverum Biotechnologies, Inc.
TABLE OF CONTENTS
Page
 
 


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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements

Adverum Biotechnologies, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30, 2020December 31, 2019
Assets
Current assets:
Cash and cash equivalents$27,359  $65,897  
Short-term investments
252,780  100,138  
Prepaid expenses and other current assets2,542  9,835  
Total current assets
282,681  175,870  
Operating lease right-of-use assets20,011  20,963  
Property and equipment, net
27,466  24,884  
Restricted cash
999  999  
Deposit and other long-term assets
19  11  
Total assets$331,176  $222,727  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$10,367  $4,103  
Accrued expenses and other current liabilities6,666  11,271  
Lease liability, current portion
4,221  4,034  
Total current liabilities
21,254  19,408  
Lease liability, net of current portion
27,258  28,214  
Other non-current liabilities101  148  
Total liabilities
48,613  47,770  
Stockholders’ equity:
Preferred stock    
Common stock
8  7  
Additional paid-in capital720,288  560,704  
Accumulated other comprehensive loss
(598) (725) 
Accumulated deficit(437,135) (385,029) 
Total stockholders’ equity
282,563  174,957  
Total liabilities and stockholders' equity$331,176  $222,727  
See accompanying notes to condensed consolidated financial statements

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Adverum Biotechnologies, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands except per share data)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Operating expenses:
Research and development19,177  8,970  33,928  19,101  
General and administrative10,598  7,132  19,638  12,708  
Total operating expenses29,775  16,102  53,566  31,809  
Operating loss(29,775) (16,102) (53,566) (31,809) 
Other income, net575  1,148  1,460  2,366  
Net loss(29,200) (14,954) (52,106) (29,443) 
Other comprehensive loss:
Net unrealized gain on marketable securities194  20  140  23  
Foreign currency translation adjustment41  (4) (13) 38  
Comprehensive loss$(28,965) $(14,938) $(51,979) $(29,382) 
Net loss per share — basic and diluted$(0.36) $(0.23) $(0.68) $(0.46) 
Weighted-average common shares used to compute net loss per share - basic and diluted
80,229  63,740  77,010  63,429  
See accompanying notes to condensed consolidated financial statements

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Adverum Biotechnologies, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
Common StockAdditional Paid-In
Capital
Accumulated Other
Comprehensive
(Loss)/Income
Accumulated
Deficit
Total Stockholders'
Equity
SharesAmount
Balance at December 31, 201967,329  $7  $560,704  $(725) $(385,029) $174,957  
Stock-based compensation expense—  —  3,409  —  —  3,409  
Issuance of common stock, net of issuance costs of $332
10,925  1  140,872  —  —  140,873  
Common stock issued upon exercise of stock options
1,310  —  9,650  —  —  9,650  
Common stock issued upon exercise of warrants
7  —  —  —  —  —  
Common stock issued upon release of restricted stock units
462  —  —  —  —  —  
Restricted stock surrendered for taxes(155) —  (1,922) —  —  (1,922) 
Foreign currency translation adjustments —  —  —  (54) —  (54) 
Unrealized loss on marketable securities, net—  —  —  (54) —  (54) 
Net loss—  —  —  —  (22,906) (22,906) 
Balance at March 31, 202079,878  8  712,713  (833) (407,935) 303,953  
Stock-based compensation expense—  —  4,785  —  —  4,785  
Issuance of common stock, additional issuance costs—  —  (51) —  —  (51) 
Issuance of common stock upon exercise of stock options
643  —  2,487  —  —  2,487  
Common stock issued under employee stock purchase plan
57  —  475  —  —  475  
Issuance of common stock upon release of restricted stock units
66  —  —  —  —  —  
Restricted stock surrendered for taxes(5) —  (121) —  —  (121) 
Foreign currency translation adjustments—  —  —  41  —  41  
Unrealized gain on marketable securities, net—  —  —  194  —  194  
Net loss—  —  —  —  (29,200) (29,200) 
Balance at June 30, 202080,639  $8  $720,288  $(598) $(437,135) $282,563  

Balance at December 31, 201862,965  $6  $522,503  $(799) $(320,543) $201,167  
Stock-based compensation expense—  —  1,762  —  —  1,762  
Common stock issued upon exercise of stock options
119  —  162  —  —  162  
Common stock issued upon release of restricted stock units
397  —  —  —  —  —  
Restricted stock surrendered for taxes(145) —  (504) —  —  (504) 
Foreign currency translation adjustments—  —  —  42  —  42  
Unrealized gain on marketable securities, net—  —  —  3  —  3  
Net loss—  —  —  —  (14,489) (14,489) 
Balance at March 31, 201963,336  6  523,923  (754) (335,032) 188,143  
Stock-based compensation expense—  —  2,626  —  —  2,626  
Issuance of common stock, private placement
20  —  134  —  —  134  
Common stock issued upon exercise of stock options823  —  2,312  —  —  2,312  
Common stock upon release of restricted stock units
220  —  —  —  —  —  
Restricted stock surrendered for taxes(73) —  (700) —  —  (700) 
Common stock issued under employee stock purchase plan
51  —  163  —  —  163  
Foreign currency translation adjustments—  —  —  (4) —  (4) 
Unrealized gain on marketable securities, net—  —  —  20  —  20  
Net loss—  —  —  —  (14,954) (14,954) 
Balance at June 30, 201964,377  $6  $528,458  $(738) $(349,986) $177,740  
See accompanying notes to condensed consolidated financial statements.

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Adverum Biotechnologies, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June 30,
20202019
Cash flows from operating activities:
Net loss$(52,106) $(29,443) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization1,896  846  
Stock-based compensation expense8,194  4,388  
Amortization of premium and accrued interest on marketable securities(429) (414) 
Other(6) 38  
Changes in operating assets and liabilities:
Prepaid expenses and other current assets7,298  589  
Other assets(8) (18) 
Operating lease right-of-use asset952  1,078  
Accounts payable6,962  (924) 
Accrued expenses and other current liabilities(2,507) (2,029) 
Lease liability(769) 1,084  
Net cash used in operating activities(30,523) (24,805) 
Cash flows from investing activities:
Purchases of marketable securities(319,690) (70,549) 
Maturities of marketable securities160,900  41,385  
Sales of marketable securities6,748    
Purchases of property and equipment(7,328) (4,683) 
Net cash used in investing activities(159,370) (33,847) 
Cash flows from financing activities:
Proceeds from offerings of common stock, net of issuance costs140,822    
Proceeds from issuance of common stock  134  
Proceeds from issuance of common stock pursuant to option exercises12,101  2,474  
Taxes paid related to net share settlement of restricted stock units(2,043) (1,204) 
Proceeds from employee stock purchase plan475  163  
Repayment of loan  (56) 
Net cash provided by financing activities151,355  1,511  
Net decrease in cash and cash equivalents and restricted cash(38,538) (57,141) 
Cash and cash equivalents and restricted cash at beginning of period66,896  155,948  
Cash and cash equivalents and restricted cash at end of period$28,358  $98,807  
Supplemental schedule of noncash investing and financing information
Fixed assets in accounts payable, accrued expenses and other current liabilities$2,391  $291  
See accompanying notes to condensed consolidated financial statements.

6

Table of Contents
Adverum Biotechnologies, Inc. 
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Basis of Presentation
Adverum Biotechnologies, Inc. (the “Company” or "Adverum") is a clinical-stage gene therapy company targeting unmet medical needs in ocular and rare diseases. The Company develops gene therapy product candidates intended to provide durable efficacy by inducing sustained expression of a therapeutic protein. The Company’s core capabilities include clinical development, novel vector discovery, and in-house manufacturing expertise, specifically in scalable process development, assay development, and current Good Manufacturing Practices (“cGMP”) quality control. Since the Company’s inception, it has devoted its efforts to performing research and development activities, filing patent applications, hiring personnel and raising capital to support these activities.
The Company has not generated any revenue from the sale of products since its inception. The Company has experienced net losses since its inception and had an accumulated deficit of $437.1 million as of June 30, 2020. The Company expects to incur losses and have negative net cash flows from operating activities as it engages in further research and development activities. The Company believes that it has sufficient funds to continue operations into 2022.
Basis of Presentation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s consolidated financial information. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year or any other future period. The balance sheet as of December 31, 2019 is derived from the audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete consolidated financial statements.
The full extent to which the novel coronavirus disease ("COVID-19") pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses and manufacturing, clinical trials and research and development costs, is dependent upon future developments that are highly uncertain at this time.
The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC.
2. Summary of Significant Accounting Policies
Use of Estimates
The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of expenses in the condensed consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to clinical trial accruals, fair value of assets and liabilities, income taxes, and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

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Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”) and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11. The standard requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. Topic 326 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. Topic 326 will become effective for the Company beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting Topic 326, but does not expect the effect of adoption to be material.
3. Fair Value Measurements and Fair Value of Financial Instruments
The authoritative guidance on the fair value hierarchy for disclosure of fair value measurements is as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value of Level 1 securities is determined using quoted prices in active markets for identical assets. Level 1 securities consist of highly liquid money market funds. Financial assets and liabilities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis. U.S. government and agency securities, commercial paper, corporate bond and certificates of deposit are valued primarily using market prices of comparable securities, bid/ask quotes, interest rate yields and prepayment spreads and are included in Level 2. In certain cases, where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy.
The following is a summary of the Company’s cash equivalents and short-term investments:
June 30, 2020
Amortized
Cost Basis
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
(In thousands)
Level 1:
Money market funds
$5,952  $  $  $5,952  
Level 2:
U.S. government and agency securities
222,151  129  (31) 222,249  
Commercial paper
46,817  60    46,877  
Total cash equivalents and short-term investments274,920  189  (31) 275,078  
Less: cash equivalents
(22,298)     (22,298) 
Total short-term investments$252,622  $189  $(31) $252,780  


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December 31, 2019
Amortized
Cost Basis
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
(In thousands)
Level 1:
Money market funds$15,056  $  $  $15,056  
Level 2:
U.S. government and agency securities37,974  14  (2) 37,986  
Commercial paper87,983  8  (8) 87,983  
Corporate bonds10,495  6    10,501  
Total cash equivalents and short-term investments151,508  28  (10) 151,526  
Less: cash equivalents(51,391)   3  (51,388) 
Total short-term investments$100,117  $28  $(7) $100,138  

As of June 30, 2020, $55.7 million of marketable securities had remaining maturities between one and two years. The remainder of the marketable securities have a remaining maturity of less than one year. As the Company may sell these securities at any time for use in current operations even if the securities have not yet reached maturity, all marketable securities are classified as current assets in the Company's consolidated balance sheet. Management regularly reviews all of the Company’s investments for other-than-temporary declines in estimated fair value. Management determined that the gross unrealized losses on the Company’s marketable securities as of June 30, 2020 were temporary in nature and none were in continuous loss position for 12 months or more. Therefore, none of the Company’s marketable securities were other-than-temporarily impaired as of June 30, 2020.
4. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consists of the following:
June 30, 2020December 31, 2019
(In thousands)
Computer equipment and software$824  $752  
Laboratory equipment8,382  6,291  
Furniture and fixtures1,263  678  
Leasehold improvements25,282  1,602  
Construction in progress  23,553  
Total property and equipment35,751  32,876  
Less accumulated depreciation and amortization(8,285) (7,992) 
Property and equipment, net$27,466  $24,884  
Depreciation and amortization expense related to property and equipment for the three months ended June 30, 2020 and 2019 was $1.3 million, and $0.4 million, respectively, and for the six months ended June 30, 2020 and 2019 was $1.9 million and $0.8 million, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
June 30, 2020December 31, 2019
(In thousands)
Employee compensation$3,248  $4,055  
Accrued preclinical, clinical and process development costs1,656  1,973  
Accrued professional services1,197  2,607  
Other565  2,636  
Total accrued expenses and other current liabilities$6,666  $11,271  


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5. Equity Incentive Awards
Stock Options
The following table summarizes the Company’s option activity and related information:
Number of
Options
(in thousands)
Weighted-
Average
Exercise Price
Balance at December 31, 20198,995  $7.19  
Options granted3,501  19.35  
Options exercised(1,953) 6.20  
Options forfeited(576) 10.11  
Balance at June 30, 20209,967  $11.49  
Exercisable as of June 30, 20203,115  $7.89  
Restricted Stock Units (“RSUs”)
The following table summarizes the Company’s RSUs activity and related information:
Number of Units
(in thousands)
Weighted-
Average Grant-
Date Fair Value
Outstanding at December 31, 20191,121  $4.59  
Granted104  15.75  
Vested and released(529) 4.59  
Forfeited(94) 7.10  
Outstanding at June 30, 2020602  $6.13  
Stock-Based Compensation Expense
The following table presents, by operating expense, the Company’s stock-based compensation expense:
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
(In thousands)
Research and development$1,668  $845  $2,916  $1,477  
General and administrative3,117  1,781  5,278  2,911  
Total stock-based compensation expense$4,785  $2,626  $8,194  $4,388  

6. Net Loss per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period using the treasury stock method. Outstanding stock options, RSUs, rights under the employee stock purchase plan (“ESPP”) and warrants are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

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The following common stock equivalents outstanding at the end of the periods presented were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:
June 30, 2020June 30, 2019
(In thousands)
Stock options9,9677,888
Restricted stock units6021,280
ESPP118
Warrants to purchase common stock8090
10,6609,266  

7. Related Party Transaction
In our February 2020 underwritten public offering of common stock, James Scopa, a member of our Board, and Anne Kenner, as Trustees for the James P. Scopa and Anne E. Kenner Family Trust (the “Trust”) purchased on behalf of the Trust 10,000 shares of our common stock at a price of $13.75 per share, the public offering price in our February 2020 underwritten public offering of common stock, for an aggregate purchase price of $0.1 million, payable in cash.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The interim financial statements included in this Quarterly Report on Form 10-Q and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2019, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission (SEC) on March 12, 2020. In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). These forward-looking statements are subject to risks and uncertainties, including those discussed in the section titled “Risk Factors,” set forth in Part II – Other Information, Item 1A below and elsewhere in this report that could cause actual results to differ materially from historical results or anticipated results. In particular, we encourage you to review the risk factor related to the impact of the coronavirus pandemic titled “The coronavirus (“COVID-19”) pandemic has impacted our business practices and the effects of its continued impact on our business, results of operations, and financial condition will depend on future developments, which cannot be predicted.”
Overview
We are a clinical-stage gene therapy company targeting unmet medical needs in ocular and rare diseases. We develop gene therapy product candidates intended to provide durable efficacy by inducing sustained expression of a therapeutic protein. Our core capabilities include novel vector discovery, preclinical and clinical development and in-house manufacturing expertise, specifically in scalable process development, assay development, and current Good Manufacturing Practices (“cGMP”) quality control.
Our lead product candidate ADVM-022 is a single intravitreal (“IVT”) injection gene therapy designed to deliver long-term durability with robust treatment response, reduce the treatment burden of frequent anti-vascular endothelial growth factor (“anti-VEGF”) injections, and improve real-world vision outcomes for patients. ADVM-022 is targeting the treatment of patients with chronic retinal diseases that respond to standard-of-care anti-VEGF therapy, including wet age-related macular degeneration (“wet AMD”) and diabetic macular edema (“DME”). ADVM-022 utilizes a proprietary vector capsid, AAV.7m8, carrying an aflibercept coding sequence under the control of a proprietary expression cassette.
Wet AMD is a leading cause of vision loss in patients over 60 years of age, with a prevalence of approximately 1.2 million individuals in the U.S. and 3 million worldwide. In recognition of the need for new treatment options for wet AMD, the U.S. Food and Drug Administration (“FDA”) granted Fast Track designation for ADVM-022 for the treatment of wet AMD.
We are conducting the OPTIC trial, designed as a multi-center, open-label, Phase 1, dose-ranging safety trial of ADVM-022 in patients with wet AMD who have demonstrated responsiveness to anti-VEGF treatment. Patients in OPTIC are treatment experienced, and previously required frequent anti-VEGF injections to control their wet AMD and to maintain functional vision. Patients received a high dose (6 x 10^11 vg/eye) of ADVM-022 in Cohort 1 (n=6) and Cohort 4 (n=9), and patients received a low dose (2 x 10^11 vg/eye) of ADVM-022 in Cohort 2 (n=6) and Cohort 3 (n=9).
In OPTIC, ADVM-022 continues to show robust treatment response from both high and low doses. We have observed long-term durability beyond 15 months from a single IVT injection of ADVM-022 with zero anti-VEGF rescue injections in Cohort 1 (high dose). ADVM-022 continues to be well tolerated across all four cohorts. In addition, we have seen encouraging early safety data with prophylactic steroid eye drops from Cohort 4 (high dose) consistent with Cohort 3 (low dose).
With OPTIC enrollment complete, we plan to present clinical data from all four cohorts by the end of 2020 and initiate a pivotal trial for ADVM-022 in wet AMD in mid-2021. As we advance ADVM-022 for two large ocular disease indications, we are initiating process scale-up from 200L to 1000L scale to support the future commercial product launch of ADVM-022. In addition, we are beginning to plan for in-house manufacturing capabilities with the initiation of site selection.
Diabetes impacts over 30 million people in the United States, over 400 million people globally and is increasing in prevalence. Approximately 5% of adults with type II diabetes are impacted by DME, a vision-threatening complication of diabetic retinopathy (“DR”) and the leading cause of vision loss in patients with DR. Based on the promising safety and efficacy data from the OPTIC trial for ADVM-022 in patients with wet AMD, we are advancing our novel gene therapy for patients with DME. We recently initiated the INFINITY Phase 2 trial, a multi-center, randomized, double-masked, active comparator-controlled study evaluating a single IVT injection of ADVM-022 in patients with DME.
In the INFINITY trial, we have begun randomizing patients and plan to enroll approximately 33 patients. The INFINITY trial is designed to demonstrate superior control of disease activity following a single IVT injection of ADVM-022 compared to a single aflibercept injection, as measured by time to worsening of DME disease activity in the study eye. Additional objectives include assessments of treatment burden, visual acuity, retinal anatomy and safety outcomes. Participants in this double-masked trial are being randomized to one of three arms for their study eye treatment: Arm 1 will receive high dose (6 x 10^11 vg/eye) of ADVM-022, Arm 2 will receive low dose (2 x 10^11 vg/eye) of ADVM-022, and Arm 3 will receive aflibercept at a dose of 2 mg. As we advance the INFINITY trial, we plan to present clinical data from this trial in the second half of 2021.

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We have licensed the right to use AAV.7m8 to GenSight Biologics S.A. (“GenSight”) to deliver certain therapeutic transgenes, including channel rhodopsin protein, which GenSight is using in their product candidate GS030 for retinitis pigmentosa, currently in clinical development.
In the first quarter of 2020, we moved into our new facility in Redwood City, California. This new 81,000 square foot facility serves as our corporate headquarters and includes expanded laboratory space as well as space for expanded manufacturing process capabilities.
Impact of COVID-19
Our results of operations and financial condition for the three and six months ended June 30, 2020 were not significantly impacted by the COVID-19 pandemic. However, the full extent to which the COVID-19 pandemic will directly or indirectly impact these areas in the future is unknown at this time and will depend on future developments that are unpredictable. We are actively monitoring and managing our response and assessing actual and potential impacts to these areas. Please refer to the “Risk Factors” section for further discussion of the risks we face as a result of the COVID-19 pandemic.
Impact on Operations
We are continuously evaluating and addressing potential impacts of the COVID-19 pandemic on our operations. To date, we have experienced limited impact due to COVID-19 on our operations. Our offices, laboratories, clinical trial sites, contract research organizations (“CROs”), contract manufacturing organizations, and other collaborators and partners are located in jurisdictions where quarantines, executive orders, shelter-in-place orders, guidelines, and other similar orders and restrictions intended to control the spread of the disease have been put in place by governmental authorities.
We are committed to the health and safety of our employees and their families and doing our part to slow the community spread of COVID-19. In mid-March, we implemented a number of actions, including a work-from-home policy for employees whose jobs do not require them to be onsite, allowing for flexible work schedules, restricting in-person meetings, and limiting onsite activities to only the most time-critical or necessary operational activities. We have maintained certain essential in-person laboratory functions in order to advance key research and development initiatives, supported by the implementation of updated onsite procedures. We believe these measures and others have allowed us to mitigate, but not eliminate, the effects and risks on our on-site operations posed by the COVID-19 pandemic.
Impact on Clinical Trials
The ultimate impact of the COVID-19 pandemic on our ongoing and planned clinical trials is uncertain and subject to change. To date, we have experienced limited impact due to COVID-19 on our ongoing clinical programs, including the OPTIC and INFINITY clinical trials. We are working closely with our clinical trial sites to monitor and attempt to address or limit the potential negative impacts of the evolving COVID-19 outbreak on patient safety, patient enrollment, continued participation of patients already enrolled in our clinical studies, protocol compliance, data quality, and overall study integrity. Despite these efforts, we are unsure as to whether the COVID-19 pandemic will significantly impact trial enrollment or completion of our current or planned clinical studies.
Impact on Supply Chain and Manufacturing
While we have not yet experienced significant disruptions to our supply chain and manufacturing as a result of the COVID-19 pandemic, we cannot be certain that this trend will continue. Based on current information, we believe that our partners in our supply chain have been and will continue to serve us continuously during the COVID-19 pandemic. However, certain of these partners have prioritized and allocated more resources and capacity to supply drug product or raw materials to other companies engaged in the study of potential treatments or vaccinations for COVID-19, which could result in supply interruptions. We have sufficient drug supply for our current clinical trials; however, to mitigate against future potential delays in product supply, we are currently implementing additional measures to address these risks, including securing additional supplies and manufacturing capacity reserve, which have resulted in additional expenses and may result in other additional expenses in the future.
Financial Overview
Summary
We have not generated positive cash flow or net income from operations since our inception and, as of June 30, 2020, we had an accumulated deficit of $437.1 million. We expect to incur substantial expenses and increasing losses from operations in the foreseeable future as we continue our research and development efforts, advance our product candidates through preclinical and clinical development, manufacture clinical study materials, seek regulatory approval, and prepare for and, if approved, proceed to commercialization. We are at an early stage of development and may never be successful in developing or commercializing our product candidates.

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While we may in the future generate revenue from a variety of sources, including license fees, milestone and research and development payments in connection with strategic partnerships, and potentially revenue from product sales if any of our product candidates are approved, to date we have not generated any revenue from product sales.
We currently have no operational clinical or commercial manufacturing facilities, and all of our clinical manufacturing activities are currently contracted out to third parties. Additionally, we use third-party CROs to carry out our clinical development and we do not have a sales organization.
We expect to incur substantial and increasing expenditures in the foreseeable future for the development and potential commercialization of our product candidates. We will need substantial additional funding in the future to support our operating activities as we advance our product candidates through preclinical and clinical development, seek regulatory approval and prepare for and, if approved, proceed to commercialization. Adequate funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital, or to do so on acceptable terms, when needed, or to form additional collaboration partnerships to support our efforts, we could be forced to delay, reduce or eliminate our research and development programs or potential commercialization efforts.
As of June 30, 2020, we had $280.1 million in cash, cash equivalents and short-term investments. We believe that we have sufficient cash to fund operations into 2022.
Revenue
To date we have not generated any revenue from the sale of our products. We have generated revenue through research, collaboration and license arrangements with strategic partners. Our ability to generate product revenue and become profitable depends upon our ability to successfully develop and commercialize our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the amount or timing of product revenue. Even if we are able to generate revenue from the sale of our products, our sales may not be sufficient to generate cash from operations, in which case we may be unable to continue our operations at planned levels and be forced to reduce our operations.
Research and Development Expenses
Conducting a significant amount of research and development is central to our business model. Research and development expenses primarily include personnel-related costs, stock-based compensation expenses, laboratory supplies, consulting costs, external contract research and development expenses, including expenses incurred under agreements with CROs, the cost of acquiring, developing and manufacturing clinical study materials, and overhead expenses, such as rent, equipment depreciation, insurance and utilities.
We expense research and development costs as incurred. We defer and expense advance payments for goods or services for future research and development activities as the goods are delivered or the related services are performed.
We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and CROs that conduct and manage preclinical studies and clinical trials on our behalf. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. We estimate the amounts incurred through communications with third party service providers and our estimates of accrued expenses as of each balance sheet date are based on information available at the time. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly.
At this time, we cannot reasonably estimate the nature, timing or aggregate costs of the efforts that will be necessary to complete the development of any of our product candidates. The successful development and commercialization of a product candidate is highly uncertain, and clinical development timelines, the probability of success, and development and commercialization costs can differ materially from expectations.
General and Administrative Expenses
General and administrative expenses primarily include personnel-related costs, stock-based compensation, professional fees for legal, consulting, audit and tax services, overhead expenses, such as rent, equipment depreciation, insurance and utilities, and other general operating expenses not otherwise included in research and development expenses. Our general and administrative expenses may increase in future periods if and to the extent we elect to increase our investment in infrastructure to support continued research and development activities and potential commercialization of our product candidates. We will continue to evaluate the need for such investment in conjunction with our ongoing consideration of our pipeline of product candidates. We anticipate increased expenses related to audit, legal and regulatory functions, as well as director and officer insurance premiums and investor relations costs.

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Other Income, Net
Other income, net primarily consists of interest income on our cash equivalents and short-term investments in marketable securities.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. There have been no material changes to our critical accounting policies from those described in our Annual Report on Form 10-K as filed with the SEC on March 12, 2020.
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2020 and 2019
Three Months Ended
June 30,
Six Months Ended
June 30,
20202019
Change
20202019
Change
(In thousands)
Operating expenses:
Research and development$19,177  $8,970  $10,207  $33,928  $19,101  $14,827  
General and administrative
10,598  7,132  3,466  19,638  12,708  6,930  
Total operating expenses
29,775  16,102  13,673  53,566  31,809  21,757  
Operating loss(29,775) (16,102) (13,673) (53,566) (31,809) (21,757) 
Other income, net
575  1,148  (573) 1,460  2,366  (906) 
Net loss$(29,200) $(14,954) $(14,246) $(52,106) $(29,443) $(22,663) 
Research and Development Expense
Research and development expense increased $10.2 million to $19.2 million for the three months ended June 30, 2020 from $9.0 million for the three months ended June 30, 2019. This overall increase was primarily related to a $5.8 million increase in production costs related to product candidate ADVM-022 and earlier-stage research programs, a $2.3 million increase in personnel-associated costs including higher stock-based compensation expenses, salaries and bonus as a result of increased headcount, a $1.0 million increase in laboratory and CRO costs, a $0.5 million increase in recruiting fees, and a $0.4 million increase in facilities costs as we fully transitioned into the new facilities in the second quarter of 2020. Stock-based compensation expense included in research and development expenses was $1.7 million for the second quarter of 2020, compared to $0.8 million for the second quarter of 2019.
Research and development expense increased $14.8 million to $33.9 million for the six months ended June 30, 2020 from $19.1 million for the six months ended June 30, 2019. This overall increase was primarily related to a $7.5 million increase in production costs related to product candidate ADVM-022 and earlier-stage research programs, a $3.8 million increase in personnel-associated costs including higher stock-based compensation expenses, salaries and bonus as a result of increased headcount, a $1.2 million increase in facilities costs as we moved into the new facilities during the first quarter of 2020, a $0.9 million increase in laboratory costs, and a $0.9 million increase in contractors, consultants and recruiting fees. Stock-based compensation expense included in research and development expenses was $2.9 million for the six months ended June 30, 2020, compared to $1.5 million for the six months ended June 30, 2019.
For the periods presented, our research and development activities are attributable to our wet AMD, DME, rare disease programs and earlier-stage research programs. We expect that research and development expenses will increase in future periods as we continue to invest in advancing our gene therapy product candidate ADVM-022 and earlier-stage research programs.

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General and Administrative Expense
General and administrative expense increased $3.5 million to $10.6 million for the three months ended June 30, 2020 from $7.1 million for the three months ended June 30, 2019. This reflects increases of $2.2 million in personnel-associated costs including higher stock-based compensation expense, salaries and bonus as a result of increased headcount, $0.8 million in depreciation expense as the new facilities were in full service during the second quarter of 2020, and $0.5 million in consulting and contractor costs. Stock-based compensation expense included in general and administrative expenses was $3.1 million for the second quarter of 2020, compared to $1.8 million for the second quarter of 2019.
General and administrative expense increased $6.9 million to $19.6 million for the six months ended June 30, 2020 from $12.7 million for the six months ended June 30, 2019. This reflects increases of $3.9 million in personnel-associated costs including higher stock-based compensation expense, salaries and bonuses as a result of increased headcount, $1.1 million in consulting and contractor costs to support our organizational growth, $1.0 million in facility costs and depreciation expense primarily for the new facility, and $0.9 million professional expenses for increased expenses for audit, tax, patent and other services. Stock-based compensation expense included in general and administrative expenses was $5.3 million for the six months ended June 30, 2020, compared to $2.9 million for the six months ended June 30, 2019.
We expect that general and administrative expenses will increase in future periods as we continue to support advancing our gene therapy programs. We anticipate increased expenses related to audit, legal, finance and investor functions to support our organizational growth.
Other Income, Net
The decrease of $0.6 million and $0.9 million in other income, net, for the three and six months ended June 30, 2020 as compared to 2019, respectively, was primarily due to a lower yield from our investment portfolio.
Liquidity and Capital Resources
We have not generated positive cash flow or net income from operations since our inception and as of June 30, 2020, we had an accumulated deficit of $437.1 million. As of June 30, 2020, we had $280.1 million in cash, cash equivalents and short-term investments compared to $166.0 million as of December 31, 2019. We believe that our existing cash and cash equivalents and short-term investments as of June 30, 2020 will be sufficient to fund our operations into 2022.
In February 2020, we sold an aggregate of 10,925,000 shares of our common stock for $140.8 million of net proceeds after deducting underwriting discounts and commissions and estimated offering expenses.
We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our product candidates and ongoing internal research and development programs, and expenses to build out our new facility. At this time, we cannot reasonably estimate the nature, timing or aggregate amount of costs for our development, potential commercialization, and internal research and development programs. However, in order to complete our planned preclinical trials and current and future clinical trials, and to complete the process of obtaining regulatory approval for our product candidates, as well as to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding in the future.
If and when we seek additional funding, we will do so through equity or debt financings, collaborative or other arrangements with corporate sources or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital in the future could have a negative impact on our financial condition and our ability to pursue our business strategies. To complete development and commercialization of any of our product candidates, we anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:
the initiation, progress, timing, costs and results of preclinical studies and any clinical trials for our product candidates;
the outcome, timing of and costs involved in, seeking and obtaining approvals from the FDA and other regulatory authorities, including the potential for the FDA and other regulatory authorities to require that we perform more studies than those that we currently expect;
the ability of our product candidates to progress through clinical development activities successfully;
our need to expand our research and development activities;
the rate of progress and cost of our commercialization of our products;
the cost of preparing to manufacture our products on a larger scale;
the costs of commercialization activities including product sales, marketing, manufacturing and distribution;
the degree and rate of market acceptance of any products launched by us or future partners;
the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

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our need to implement additional infrastructure and internal systems;
our ability to hire additional personnel;
our ability to enter into additional collaboration, licensing, commercialization or other arrangements and the terms and timing of such arrangements;
the emergence of competing technologies or other adverse market developments; and
the effects of the COVID-19 pandemic on our business, results of operations, and financial condition.
If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license other technologies or clinical product candidates or programs that we would prefer to develop and commercialize ourselves.
Cash Flows
Six Months Ended
June 30,
20202019
(in thousands)
Net cash used in operating activities$(30,523) $(24,805) 
Net cash used in investing activities(159,370) (33,847) 
Net cash provided by financing activities151,355  1,511  
Net decrease in cash and cash equivalents and restricted cash$(38,538) $(57,141) 
Cash Used in Operating Activities
During the six months ended June 30, 2020, net cash used in operating activities was $30.5 million, primarily as a result of the net loss of $52.1 million, partially offset by $9.7 million of non-cash charges mainly related to stock-based compensation expense and depreciation and amortization expenses, and $11.9 million of net increase in operating assets and liabilities, which fluctuate due to timing of expenses and payments.
During the six months ended June 30, 2019, net cash used in operating activities was $24.8 million, primarily as a result of the net loss of $29.4 million, partially offset by $5.9 million of non-cash charges primarily related to stock-based compensation expense and depreciation and amortization expense, and $1.3 million of net decrease in operating assets and liabilities, which fluctuate due to timing of expenses and payments.
Cash Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2020 consisted of $152.0 million of net purchases of marketable securities and $7.3 million of purchases of property and equipment primarily related to the new facility.
Net cash used in investing activities for the six months ended June 30, 2019 consisted of $29.2 million of net purchases of marketable securities and $4.7 million of purchases of property and equipment.
Cash Provided by Financing Activities
Net cash provided by financing activities for six months ended June 30, 2020 consisted of $140.8 million of net proceeds from the sale of our common stock and $12.1 million of net proceeds from the exercise of stock options, and $0.5 million in proceeds from employee stock purchase plan, partially offset by $2.0 million in taxes paid relating to net share settlement of restricted stock units and repayment of loans.
Net cash provided by financing activities for six months ended June 30, 2019 consisted primarily of $2.5 million of the net proceeds from the exercises of stock options, partially offset by $1.2 million in taxes paid relating to net share settlement of restricted stock units and repayment of loans.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(ii).
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item.

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Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures. Management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of June 30, 2020. The evaluation of our disclosure controls and procedures included a review of our processes and implementation and the effect on the information generated for use in this Quarterly Report on Form 10-Q. We conduct this type of evaluation quarterly so that our conclusions concerning the effectiveness of these controls can be reported in our periodic reports filed with the SEC. The overall goals of these evaluation activities are to monitor our disclosure controls and procedures and to make modifications as necessary. We intend to maintain these disclosure controls and procedures, modifying them as circumstances warrant.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2020, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including the Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely discussion regarding required disclosure.
Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting during the three months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Adverum have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 1A. Risk Factors
You should consider carefully the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. The risks described below are not the only risks facing us. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, results of operations and prospects. Further, the current coronavirus (“COVID-19”) pandemic and actions taken to address the pandemic may exacerbate the risks described below.
Risks Related to Our Financial Position and Need for Capital
We have incurred significant operating losses since inception, and we expect to incur significant losses for the foreseeable future. We may never become profitable or, if achieved, be able to sustain profitability.
We have incurred significant operating losses since we were founded in 2006 and expect to incur significant losses for the foreseeable future as we continue development of our product candidates. Losses have resulted principally from costs incurred in our research and development programs and from our general and administrative expenses. In the future, we intend to continue to conduct research and development, regulatory compliance activities and, if any of our product candidates is approved, sales and marketing activities that, together with anticipated general and administrative expenses, will likely result in us incurring significant losses for the next several years.
We currently generate no revenue from sales, and we may never be able to commercialize any of our product candidates. We do not currently have the required approvals to market any of our product candidates, and we may never receive such approvals. We may not be profitable even if we or any of our future development partners succeed in commercializing any of our product candidates. Because of the numerous risks and uncertainties associated with developing and commercializing our product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all.
We expect that our cash, cash equivalents, and short-term investments will be sufficient to fund our lead gene therapy programs into 2022. If this expectation proves to be wrong, we may be forced to delay, limit or terminate certain of our development efforts before then.
We currently expect our cash, cash equivalents and short-term investments to fund our planned operations into 2022. However, this estimate is based on a number of assumptions that may prove to be wrong, including our expectations about the timing of planned clinical trials and expected investments into our manufacturing capabilities, and changing circumstances beyond our control may cause capital to be consumed more rapidly than currently anticipated. As a result, our operating plan may change, and we may need to seek additional funds sooner than planned, through collaboration agreements and public or private financings. If we run low on capital before we are able to achieve meaningful clinical data for some or all of our product candidates, we may be unable to successfully raise additional funds, and, consequentially, may need to significantly curtail some or all of our development activities.
We will need to raise additional funding, which may not be available on acceptable terms, or at all. If we fail to obtain additional capital necessary to fund our operations, we will be unable to successfully develop and commercialize our product candidates.
We will require substantial future capital in order to complete the preclinical and clinical development for our product candidates and potentially to commercialize these product candidates. Any future clinical trials or expansion of ongoing clinical trials of our product candidates would cause an increase in our spending levels, as would other corporate activities such as building a manufacturing facility to supply our product candidates. The amount and timing of any expenditure needed to implement our development and commercialization programs will depend on numerous factors, including:
the type, number, scope, progress, expansion costs, results of and timing of any future preclinical studies and clinical trials of any of our product candidates which we are pursuing or may choose to pursue in the future;
the need for, and the progress, costs and results of, any additional clinical trials or nonclinical studies of our product candidates we may initiate based on the results of any clinical trials that we may plan or discussions with the FDA, including any additional clinical trials or nonclinical studies the FDA or other regulatory agencies may require evaluating the safety of our product candidates;
the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;

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the costs and timing of obtaining or maintaining manufacturing for our product candidates, including commercial manufacturing;
the costs and timing of establishing sales and marketing capabilities and enhanced internal controls over financial reporting;
the terms and timing of establishing collaborations, license agreements and other partnerships;
costs associated with any new product candidates that we may develop, in-license or acquire;
the effect of competing technological and market developments;
our ability to establish and maintain partnering arrangements for development; and
the costs associated with being a public company.
Some of these factors are outside of our control. We do not expect our existing capital resources to be sufficient to enable us to fund the completion of our clinical trials and remaining development programs through commercial introduction. We expect that we will need to raise additional funds in the future.
We have no product candidate approved by any regulatory authority, have not sold any products, and we do not expect to sell or derive revenue from any product sales for the foreseeable future. We may seek additional funding through collaboration agreements and public or private financings.
Additional funding may not be available to us on acceptable terms or at all and the terms of any financing may adversely affect the holdings or the rights of our stockholders. In addition, the issuance of additional shares by us, or the possibility of such issuance, may cause the market price of our shares to decline.
If we are unable to obtain funding on a timely basis, we will be unable to complete any future clinical trials for our product candidates and we may be required to significantly curtail some or all of our activities. We also could be required to seek funds through arrangements with collaborative partners or otherwise that may require us to relinquish rights to our product candidates or some of our technologies or otherwise agree to terms unfavorable to us.
Risks Related to the Discovery and Development of Our Product Candidates
Our business will depend substantially on the success of one or more of our product candidates. If we are unable to develop, obtain regulatory approval for, or successfully commercialize, any or all of our product candidates, our business will be materially harmed.
Our product candidates are in the early stages of development and will require substantial preclinical and/or clinical development and testing, manufacturing process improvement and validation, bridging studies and regulatory approval prior to commercialization. It is critical to our business to successfully develop and ultimately obtain regulatory approval for one or more of these product candidates. Our ability to commercialize our product candidates effectively will depend on several factors, including the following:
successful completion of preclinical studies and clinical trials, including the ability to demonstrate safety and efficacy of our product candidates;
receipt of marketing approvals for any future products for which we complete clinical trials, including securing regulatory exclusivity to the extent available;
establishing commercial manufacturing capabilities, for example, by engaging third-party manufacturers or developing our own manufacturing capabilities that can provide products and services to support clinical development and the market demand for our product candidates, if approved;
successful launch and commercial sales of the product, whether alone or in collaboration with potential partners;
acceptance of the product as a viable treatment option by patients, the medical community and third-party payers;
establishing market share while competing with other therapies;
a continued acceptable safety profile of our products following regulatory approval;
maintaining compliance with post-approval regulations and other requirements; and
qualifying for, identifying, registering, maintaining, enforcing and defending intellectual property rights and claims covering our product candidates.
If we or our collaborators do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to commercialize our product candidates, which would materially and adversely affect our business, financial condition, results of operations and prospects.

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In April 2019, the FDA placed our IND application for ADVM-022 for the treatment of wet age-related macular degeneration ("wet AMD") on clinical hold and requested certain information and requirements related to chemistry, manufacturing and controls (“CMC”). We subsequently responded to the FDA, and in May 2019, the FDA lifted the clinical hold, allowing dose escalation up to 2 x 10^12 vg in the OPTIC trial. However, our IND remains on partial clinical hold for dosing patients with a dose of 6 x 10^12 vg. Given the preliminary robust anatomical response we observed from patients in the first cohort, we dosed patients in the second and third cohorts of the OPTIC trial with a lower dose of 2 x 10^11 vg and in our fourth cohort at 6 x 10^11 vg. We do not currently intend to dose patients at 6 x 10^12 vg in any of our clinical trials involving ADVM-022, but should we need to, there is no guarantee that the FDA will lift the partial clinical hold promptly, if at all. In addition, if we are unable to respond to these CMC requirements and the requirements related to the partial clinical hold to the FDA’s satisfaction and within the timeframe we expect, the FDA will not remove the clinical hold, which may prevent us from beginning late-stage clinical trials involving ADVM-022, delay or prevent us from advancing our clinical programs and our business may be harmed.
Of the large number of biologics and drugs in development in the pharmaceutical industry, only a small percentage result in the submission of a biologics license application (“BLA”) to the FDA and even fewer are approved for commercialization. Furthermore, even if we do receive regulatory approval to market any of our product candidates, any such approval may be subject to limitations on the indicated uses for which we may market the product, or limitations related to its distribution. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development programs, there can be no assurance that any of our