advm-20240331

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 March 31, 2024


☐			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.)

100 Cardinal Way

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 Stock Market LLC (Nasdaq Capital 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

☐

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 May 3, 2024, there were 20,756,850 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

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Adverum Biotechnologies, Inc.

TABLE OF CONTENTS


			Page

PART I—FINANCIAL INFORMATION			5

Item 1. Financial Statements			5
Condensed Consolidated Balance Sheets (unaudited)			5
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)			6
Condensed Consolidated Statements of Stockholders’ Equity (unaudited)			7
Condensed Consolidated Statements of Cash Flows (unaudited)			8
Notes to Condensed Consolidated Financial Statements (unaudited)			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3. Quantitative and Qualitative Disclosures About Market Risk			21
Item 4. Controls and Procedures			21

PART II—OTHER INFORMATION			22

Item 1. Legal Proceedings			22
Item 1A. Risk Factors			22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			65
Item 3. Defaults Upon Senior Securities			65
Item 4. Mine Safety Disclosures			65
Item 5. Other Information			65
Item 6. Exhibits			66

SIGNATURES			67

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RISK FACTORS SUMMARY

Investing in common stock involves numerous risks, including the risks described in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects.

•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 expect that our cash, cash equivalents, and short-term investments will be sufficient to fund our planned operations into late 2025. If this expectation proves to be wrong, we may be forced to delay, limit or terminate certain of our development efforts before then.

•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.

•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.

•Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of development, including after commencement of any of our clinical trials or any clinical trials using our proprietary viral vectors.

•The occurrence of serious complications or side effects that outweigh the therapeutic benefit in connection with or during use of our product candidates, whether in nonclinical studies or clinical trials or post-approval, could lead to discontinuation of our clinical development program, refusal of regulatory authorities to approve our product candidates or, post-approval, revocation of marketing authorizations or refusal to approve new indications, which could severely harm our business prospects, financial condition and results of operations.

•The results of nonclinical studies and early clinical trials are not always predictive of future results. Any product candidate we or any of our future development partners advance into clinical trials may not have favorable results in later clinical trials, if any, or receive regulatory approval.

•If we are unable to successfully develop and maintain robust and reliable manufacturing processes for our product candidates, we may be unable to advance clinical trials or licensure applications and may be forced to delay or terminate a program.

•Changes in methods of manufacturing or formulation of our product candidates may result in additional costs or delays.

•If we are unable to produce sufficient quantities of our product candidates at acceptable costs, we may be unable to meet clinical or potential commercial demand, lose potential revenue, have reduced margins, or be forced to terminate a program.

•We and our contractors are subject to significant regulation with respect to manufacturing and testing our product candidates. We have a limited number of vendors on which we rely, including, in some cases, single source vendors, and the contract vendors on which we rely may not continue to meet regulatory requirements, may have limited capacity, or may have other factors limiting their ability to comply with their contracts with us.

•We are subject to many manufacturing and distribution risks, any of which could substantially increase our costs and limit supply of our product candidates.

•We have relied, and expect to continue to rely, on third parties under contracts and partnerships to conduct some or all aspects of our research and development, including vector production, process development, assay development, product candidates and product manufacturing and testing, protocol development, clinical trials, product distribution, commercialization, nonclinical studies, research and related activities, and these third parties may not perform satisfactorily.

•We will rely on third parties to conduct some nonclinical testing and all of our planned clinical trials. If these third parties do not meet our deadlines or otherwise fail to conduct the trials as required, our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.

•Our success depends on our ability to protect our intellectual property and our proprietary technologies.

•Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts.

•We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.

•Our rights to develop and commercialize our product candidates are subject in part to the terms and conditions of licenses granted to us by other companies and universities.

•The patent protection and patent prosecution for some of our product candidates are dependent on third parties.

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•We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

•Third party patent rights could delay or otherwise adversely affect our planned development and sale of product candidates of our programs.

•We may not be able to obtain intellectual property rights or protect our intellectual property rights throughout the world.

•Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

•If we do not obtain patent term extensions for patents covering our product candidates, our business may be materially harmed.

•Any suspension of, or delays in the commencement or completion of, clinical trials for our product candidates could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

•Final marketing approval for our product candidates by the FDA or other regulatory authorities outside the U.S. for commercial use may be delayed, limited or denied, any of which would adversely affect our ability to generate operating revenue.

•Even if we receive regulatory approval, we still may not be able to successfully commercialize any of our product candidates, and the revenue that we generate from its sales, if any, could be limited.

•If our competitors develop treatments for the target indications of our product candidates that are approved, marketed more successfully, or demonstrated to be safer or more effective or easier to administer than our product candidates, our commercial opportunity will be reduced or eliminated.

•Even if we obtain marketing approval for any of our product candidates, they could be subject to restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and if any of them are approved.

•Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.

•Healthcare and other reform legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and, if approved, may affect the prices we may obtain.

•Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain marketing approvals for our product candidates.

•We are dependent on the services of our key executives and clinical and scientific staff, and if we are not able to retain these members of our management or recruit additional management, clinical and scientific personnel, our business will suffer.

•We may encounter difficulties in managing our growth and expanding our operations successfully.

•If our information technology systems or those of third parties upon which we rely, or our data, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; material disruption of our product development programs; and other adverse consequences.

•Failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, standards, and other obligations related to data privacy and security (including security incidents) could harm our business. Compliance or the actual or perceived failure to comply with such obligations could increase the costs of our services, limit their use or adoption, and otherwise negatively affect our operating results and business.

•The trading price of the shares of our common stock has been and could continue to be highly volatile, and purchasers of our common stock could incur substantial losses.

•If we sell shares of our common stock or securities convertible into or exercisable for shares of our common stock in future financings, pursuant to licensing, collaboration or other arrangements, stockholders may experience immediate dilution and, as a result, our stock price may decline.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Adverum Biotechnologies, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)


	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	149,608	$	75,000
Short-term investments	43,720		21,526

Prepaid expenses and other current assets	5,802		6,247
Total current assets	199,130		102,773
Operating lease right-of-use assets	51,760		52,266
Property and equipment, net	13,766		14,764

Restricted cash	1,976		1,976

Deposit and other long-term assets	1,196		1,231
Total assets	$	267,828	$	173,010
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,897	$	1,921
Accrued expenses and other current liabilities	9,160		12,584
Lease liability, current portion	10,492		10,409

Total current liabilities	21,549		24,914

Long-term liabilities:
Lease liability, net of current portion	63,991		64,627

Total liabilities	85,540		89,541

Stockholders’ equity:
Preferred stock	—		—
Common stock	2		1
Additional paid-in capital	1,127,383		1,003,718
Accumulated other comprehensive loss	(533)		(473)
Accumulated deficit	(944,564)		(919,777)
Total stockholders’ equity	182,288		83,469
Total liabilities and stockholders’ equity	$	267,828	$	173,010

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 March 31,
		2024		2023
License revenue		$	—	$	3,600

Operating expenses:
Research and development		15,410		21,059
General and administrative		11,429		12,780

Total operating expenses		26,839		33,839
Operating loss		(26,839)		(30,239)
Other income, net		2,052		1,200
Net loss before income taxes		(24,787)		(29,039)
Income tax provision		—		(17)
Net loss		(24,787)		(29,056)
Other comprehensive loss:
Net unrealized (loss) gain on marketable securities		(41)		739
Foreign currency translation adjustment		(19)		(7)
Comprehensive loss		$	(24,847)	$	(28,324)
Net loss per share — basic and diluted		$	(1.50)	$	(2.90)
Weighted-average common shares used to compute net loss per share - basic and diluted		16,479		10,030

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 Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2023	10,143	$	1	$	1,003,718	$	(473)	$	(919,777)	$	83,469
Stock-based compensation expense	—	—		4,166		—		—		4,166
Issuance of common stock and pre-funded warrants for cash in private placements, net of issuance costs of $8,449	10,573	1		119,360		—		—		119,361
Common stock issued upon exercise of stock options	14	—		139		—		—		139
Common stock issued upon release of restricted stock units	25	—		—		—		—		—


Foreign currency translation adjustments	—	—		—		(19)		—		(19)
Unrealized loss on marketable securities, net	—	—		—		(41)		—		(41)
Net loss	—	—		—		—		(24,787)		(24,787)
Balance at Balance at March 31, 2024	20,755	$	2	$	1,127,383	$	(533)	$	(944,564)	$	182,288




Balance at December 31, 2022	10,012	$	1	$	985,660	$	(1,531)	$	(802,612)	$	181,518
Stock-based compensation expense	—	—		4,563		—		—		4,563

Common stock issued upon release of restricted stock units	45	—		—		—		—		—

Foreign currency translation adjustments	—	—		—		(7)		—		(7)
Unrealized gain on marketable securities, net	—	—		—		739		—		739
Net loss	—	—		—		—		(29,056)		(29,056)
Balance at March 31, 2023	10,057	$	1	$	990,223	$	(799)	$	(831,668)	$	157,757

See accompanying notes to condensed consolidated financial statements.

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Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net loss	$	(24,787)	$	(29,056)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	997		1,592
Stock-based compensation expense	4,166		4,563
Net accretion of discount on marketable securities, net	(333)		(960)
Non-cash lease expense	506		1,427


Other	(19)		19
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	480		924
Deposit and other long-term assets and deferred rent receivable	35		62
Accounts payable	(347)		631
Accrued expenses and other liabilities	(3,391)		(749)

Lease liability	(552)		(865)

Net cash used in operating activities	(23,245)		(22,412)
Cash flows from investing activities:
Purchases of marketable securities	(26,937)		(20,232)
Maturities of marketable securities	5,000		41,850

Purchases of property and equipment	(90)		(85)
Net cash (used in) provided by investing activities	(22,027)		21,533
Cash flows from financing activities:

Proceeds from issuance of common stock and pre-funded warrants in private placements, net of issuance costs	119,741		—
Proceeds from issuance of common stock pursuant to option exercises	139		—





Net cash provided by financing activities	119,880		—
Net increase (decrease) in cash and cash equivalents and restricted cash	74,608		(879)
Cash and cash equivalents and restricted cash at beginning of period	76,976		70,934
Cash and cash equivalents and restricted cash at end of period	$	151,584	$	70,055
Cash and cash equivalents	149,608		67,552
Restricted cash	1,976		2,503
Cash and cash equivalents and restricted cash at end of period	$	151,584	$	70,055
Supplemental schedule of noncash investing and financing information


Issuance costs included in accounts payable	$	380	$	—

Remeasurement of operating lease right-of-use assets	$	—	$	8,004
Property and equipment in accounts payable, accrued expenses and other current liabilities	$	—	$	17

See accompanying notes to condensed consolidated financial statements.

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Adverum Biotechnologies, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Basis of Presentation

Adverum Biotechnologies, Inc. (the “Company” or “Adverum”) was incorporated in Delaware on July 17, 2006 and is headquartered in Redwood City, California. The Company aims to establish gene therapy as a new standard of care for highly prevalent ocular diseases. The Company develops gene therapy product candidates intended to provide durable efficacy by inducing sustained expression of a therapeutic protein.

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 $944.6 million as of March 31, 2024. The Company expects to incur losses and have negative net cash flows from operating activities as it engages in further research and development activities. As of March 31, 2024, the Company had cash, cash equivalents and short-term investments of $193.3 million, which the Company believes will be sufficient to fund its operations into late 2025.

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 condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2024 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, 2023 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 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, 2023 filed with the SEC.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources. Accounting estimates and judgments are inherently uncertain, and actual results could differ from these estimates.

March 2024 Reverse Stock Split

On March 21, 2024, the Company effected a 1-for-10 reverse stock split of its common stock. The par value and the authorized shares of the common stock were not adjusted as a result of the reverse stock split.

All equity related information including per share amounts for all periods presented in these financial statements and the notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split.

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Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in ASU 2023-07 are intended to improve reportable segment disclosure, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The amendments in this ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The Company is evaluating the impact of this guidance on its financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of this guidance on its financial statements and related disclosures.

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.

Level 1 securities consist of highly liquid money market funds. U.S. government and agency securities and commercial paper are valued primarily using market prices of comparable securities, bid/ask quotes, interest rate yields and prepayment spreads and are included in Level 2.

The following is a summary of the Company’s cash equivalents and short-term investments:


	March 31, 2024
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
Level 1:
Money market funds	$	5,333	$	—	$	—	$	5,333
Level 2:
Commercial paper	142,377		—		(78)		142,299
U.S. government and agency securities	35,485		—		(11)		35,474
Total cash equivalents and short-term investments	183,195		—		(89)		183,106
Less: Cash equivalents	(139,451)		—		65		(139,386)
Total short-term investments	$	43,744	$	—	$	(24)	$	43,720

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	December 31, 2023
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
Level 1:
Money market funds	$	10,204	$	—	$	—	$	10,204
Level 2:
Commercial paper	64,693		—		(35)		64,658
U.S. government and agency securities	17,616		4		(17)		17,603

Total cash equivalents and short-term investments	92,513		4		(52)		92,465
Less: Cash equivalents	(70,972)		—		33		(70,939)
Total short-term investments	$	21,541	$	4	$	(19)	$	21,526

As of March 31, 2024, the stated maturities of the Company’s investments portfolio are generally less than one year, except for $2.9 million that have remaining maturities between one and two years. The Company classifies its investments as short-term marketable securities even though the stated maturities may be one year or more beyond of the current balance sheet date as the Company has the ability to sell these securities at any time for use in current operations. The aggregate fair value of debt securities in an unrealized loss position at March 31, 2024 and December 31, 2023 was $174.9 million and $71.3 million, respectively, which are highly liquid funds with high credit ratings that have final maturity of less than two years from date of purchase. The Company has not recorded an allowance for credit losses as of March 31, 2024 and December 31, 2023 related to these securities. The accrued interest receivable on available-for-sale marketable securities was immaterial at March 31, 2024 and December 31, 2023. The Company held 41 securities that were in unrealized loss positions as of March 31, 2024. There were no individual securities that were in a significant unrealized loss position as of March 31, 2024 and December 31, 2023. The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. The Company had not recorded any impairment charges on available-for-sale securities as of March 31, 2024 and December 31, 2023.

4. License Revenue

Lexeo - On January 25, 2021, the Company and Lexeo Therapeutics, Inc (“Lexeo”) entered into a License Agreement pursuant to which the Company granted Lexeo an exclusive, worldwide, royalty-bearing license to certain of the Company’s intellectual property to develop, manufacture, and commercialize a gene therapy product to treat cardiomyopathy due to Friedreich’s Ataxia.

Under the terms of the agreement, the Company is eligible to receive additional payments upon the achievement of certain milestones. Additionally, the Company will receive royalty payments on net sales subject to a cap and reductions based on patent expiry, anti-stacking, and a defined royalty floor percentage.

In February 2023, Lexeo notified the Company that it achieved the first development milestone; accordingly, the Company is eligible to receive additional payments. Therefore, the Company recognized $3.5 million of license revenue during the three months ended March 31, 2023. No milestones were achieved and no license revenue was recognized during the three months ended March 31, 2024.

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5. Leases

Redwood City

The Company has a lease for facilities in Redwood City, California (“Redwood City Premises”), which expires December 31, 2031, with an option to extend for a period of eight years. Related to this lease, the Company provided the landlord with a letter of credit, as amended, in the amount of $1.9 million, which is classified as restricted cash under long term assets on the Company’s condensed consolidated balance sheets.

Prior to September 30, 2023, the Company had two facility leases in Redwood City. In March 2023, the Company entered into an amendment to accelerate the expiration of the lease for one of the facilities in its Redwood City Premises from December 31, 2031 to September 30, 2023. Concurrently, the Company entered into an agreement for additional tenant improvement allowance towards its other Redwood City Premises. The Company accounted for this amendment as a lease modification in accordance with ASC 842-10-25-11(d). As a result of the modification the Company revalued the lease liability based on the new and remaining lease terms, which resulted in a reduction to the lease liability of $8.3 million, and recognized the remeasurement to the lease liabilities as an adjustment to the right-of-use asset. The estimated value of non-cash consideration, composed primarily of leasehold improvements and furniture and fixtures, was $14.9 million, which was fully amortized as of September 30, 2023. There was no charge recognized in the consolidated statement of operations.

North Carolina

On January 8, 2021, the Company entered into an operating lease agreement for a building in North Carolina (“NC Premises”). The lease commenced in April 2021 when the Company obtained control of the NC Premises, and the lease term expires in October 2037 with two options to extend the lease term for a period of five years each.

On October 26, 2021, the Company entered into a sublease agreement with a subtenant for the NC Premises through October 2037, the remainder of the lease term, and concurrently changed the lease payment terms of the head lease. In addition, the remainder of the tenant improvement allowance under the original lease of approximately $22.7 million was transferred to the subtenant. This change in the Company’s payment terms with the landlord at the time of the sublease was considered to be a lease modification and the Company remeasured the lease liability and right-of-use asset on the modification date, with no amounts recognized in the consolidated statement of operations. The base annual rental rates, payment schedules and amounts under the sublease agreement are substantially the same as the original payment terms by Adverum to the landlord.

On April 3, 2023, the Company entered into an amendment of the lease of its NC Premises with the landlord and subtenant. Under this amendment, the parties agreed to substantially reduce the total tenant improvement allowance in exchange for lower monthly rent. The Company accounted for this amendment as a lease modification in accordance with ASC 842-10-25-11(d). The Company remeasured the lease liability, resulting in a reduction to the lease liability with a corresponding reduction of the right-of-use asset of $5.7 million in the quarter ended June 30, 2023. There was no charge recognized in the consolidated statement of operations.

Sublease income was $1.3 million and $1.4 million for the three months ended March 31, 2024 and 2023, respectively, which was classified as a reduction of rent expense in general and administrative expense.

6. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consists of the following:


	March 31, 2024		December 31, 2023
	(In thousands)
Laboratory equipment	$	14,788	$	14,638
Leasehold improvements	13,586		13,586
Computer equipment and software	901		868

Construction in progress	—		184
Total property and equipment	29,275		29,276
Less: Accumulated depreciation and amortization	(15,509)		(14,512)
Property and equipment, net	$	13,766	$	14,764

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Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


	March 31, 2024		December 31, 2023
	(In thousands)
Employee compensation	$	4,169	$	8,040
Accrued nonclinical, clinical and process development costs	3,298		3,367
Accrued professional services	674		351
State income tax payable	109		101
Other	910		725
Total accrued expenses and other current liabilities	$	9,160	$	12,584

7. Stockholders' Equity

February 2024 Private Placements

On February 7, 2024, the Company entered into a securities purchase agreement, pursuant to which the Company sold 10.5 million shares of its common stock and, in lieu of common stock, pre-funded warrants to purchase an aggregate of 75,000 shares of common stock (the “Pre-Funded Warrants”) to certain institutional and accredited investors in a private placement. The purchase price per share was $12.00, or $11.999 per Pre-Funded Warrant, which represents the purchase price per share minus the $0.001 per share exercise price of each Pre-Funded Warrant. Such Pre-Funded Warrants can be exercised at any time and have no expiration date.

The exercise of the outstanding Pre-Funded Warrants is subject to a beneficial ownership limitation of 9.99%. The Pre-Funded Warrants were classified as a component of stockholders' equity. As of March 31, 2024, none of the Pre-Funded Warrants had been exercised.

Concurrently, the Company also entered into a securities purchase agreement with two directors of the Company (together with the private placement to certain institutional and accredited investors, the “Private Placements”). The Company issued and sold 23,000 shares at $13.50 per share on otherwise substantially the same terms as those set forth in the Securities Purchase Agreement.

At the close of the Private Placements on February 7, 2024, the Company received total gross proceeds of $127.8 million, before deducting placement agent fees and offering expenses.

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, 2023	2,303	$	48.71
Options granted	557	18.51
Options exercised	(14)	10.14
Options forfeited	(86)	28.44
Balance at March 31, 2024	2,760	$	43.43
Exercisable as of March 31, 2024	1,253	$	73.42

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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, 2023	154	$	21.73
Granted	73	19.21
Vested and released	(25)	27.41
Forfeited	(4)	10.81
Outstanding at March 31, 2024	198	$	20.33

Stock-Based Compensation Expense

The following table presents, by operating expense, the Company’s stock-based compensation expense:


	Three Months Ended March 31,
		2024		2023
		(In thousands)
Research and development		$	1,120	$	1,381
General and administrative		3,046		3,182
Total stock-based compensation expense		$	4,166	$	4,563

8. 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 and rights under the employee stock purchase plan (“ESPP”) 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.

For the three months ended March 31, 2024, the pre-funded warrants to purchase the Company's shares of common stock issued in the Private Placements were included in the basic and diluted net loss per share calculation as the exercise price is non-substantive and virtually assured.

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:


	March 31, 2024	March 31, 2023
	(In thousands)
Stock options	2,760	2,331
Restricted stock units	198	173
ESPP	42	115

	3,000	2,619

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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, 2023, 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 18, 2024. 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”). In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These forward-looking and other 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.

Overview

Adverum is a clinical-stage company that aims to establish gene therapy as a new standard of care for highly prevalent ocular diseases. We discover and develop gene therapy product candidates intended to provide durable efficacy by inducing sustained expression of a therapeutic protein. Our lead product candidate, ixoberogene soroparvovec (“Ixo-vec”), formerly referred to as ADVM-022, is a single, in-office intravitreal (“IVT”) injection gene therapy product designed to deliver long-term durable therapeutic levels of aflibercept associated with a robust, sustained treatment response, reducing the treatment burden and fluctuations in macular fluid associated with bolus anti-vascular endothelial growth factor (“VEGF”) IVT injections. Ixo-vec is currently being developed for the treatment of patients with wet age-related macular degeneration (“wet AMD”), also known as neovascular AMD, and is being evaluated in the ongoing LUNA Phase 2 clinical trial. We are also developing an early-stage pipeline of gene therapy programs targeting the treatment of other highly prevalent ocular diseases. Our core capabilities include novel vector evaluation, cassette engineering, ocular IND-enabling nonclinical and clinical development, scalable process development, assay development, and current Good Manufacturing Practices (“GMP”) quality control.

Ixo-vec (formerly known as ADVM-022)

Ixo-vec utilizes an engineered, proprietary capsid, AAV.7m8, which along with a proprietary expression cassette is capable of transducing retinal cells and expressing aflibercept after a single in-office IVT injection. This product candidate is intended to improve both real-world vision outcomes and quality of life for patients.

Wet AMD is a leading cause of blindness in patients over 65 years of age, with a prevalence of approximately 20 million individuals worldwide living with wet AMD. Age-related macular degeneration (“AMD”) is expected to impact 288 million people worldwide by 2040, with wet AMD accounting for approximately ten percent of those cases. Up to 42% of patients with wet AMD experience neovascularization in the second eye in the first two to three years following diagnosis in the first eye.

In November 2018, we initiated the OPTIC trial, designed as an open-label, dose-ranging trial evaluating the safety and efficacy of Ixo-vec in subjects with wet AMD who have demonstrated responsiveness to anti-VEGF treatment. Subjects in OPTIC are treatment experienced and previously required frequent anti-VEGF injections to manage their wet AMD and to maintain functional vision. OPTIC was a two-year trial, which the last subject completed in June 2022, and we continue to follow subjects in the OPTIC extension trial for an additional three years, for a total of five years. Through the most recent data cutoff date of August 23, 2023, we have seen strong signals of therapeutic efficacy in OPTIC in both the 6 x 10^11 vg/eye (“6E11”) and 2 x 10^11 vg/eye (“2E11”) doses, including maintenance of mean best-corrected visual acuity (“BCVA”) and maintenance to improvement of mean central subfield thickness (“CST”), currently out to three years, and stable aflibercept protein levels through the latest reported follow-up, which is currently up to 4.5 years. Ixo-vec has been generally well tolerated, with the most common adverse events being dose-dependent adeno-associated virus (“AAV”) associated ocular inflammation that has been responsive to topical corticosteroid therapy.

In September 2022, we dosed the first subject in our LUNA Phase 2 trial of Ixo-vec. The LUNA trial is a multicenter, double-masked, randomized, parallel-group trial evaluating two doses of Ixo-vec - 2E11, the lower dose used in the OPTIC trial, and a new, lower 6 x 10^10 vg/eye dose (“6E10”) dose. In addition, LUNA will assess enhanced prophylactic corticosteroid regimens, including local corticosteroids and combinations of local and systemic corticosteroids to test the relative contribution of local versus systemic AAV exposure on ocular inflammation. The endpoints are similar to the OPTIC trial and focus on mean change in BCVA, CST and treatment burden from baseline to one year, and incidence and severity of adverse events. In August 2023, we announced that LUNA was fully enrolled, with a total of 60 subjects randomized equally between the 2E11 and 6E10 doses.

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In February 2024, we announced LUNA preliminary safety and efficacy data suggesting that both the 2E11 and 6E10 doses demonstrated maintenance of visual and anatomic outcomes. Notably, both doses resulted in favorable reductions in annualized anti-VEGF injections and the percentage of subjects remaining free of injections, consistent with results observed in the OPTIC trial. In those subjects who had completed 26 weeks of follow-up, at the 6E10 (n=19) and 2E11 (n=20) doses, Ixo-vec demonstrated reduction in annualized anti-VEGF injection rates of 90% and 94%, respectively, and injection free rates of 68% and 85%, respectively. In addition, Ixo-vec was well-tolerated, and when present intraocular inflammation was responsive to per-protocol local corticosteroids. Preliminary data suggest that Ozurdex® plus difluprednate eye drops may be a promising prophylactic regimen for future pivotal studies. In this potential “go-forward” regimen, the vast majority of patients had no inflammation, with over 90% of these patients having no or minimal inflammation. We plan to initiate a Phase 3 clinical trial of Ixo-vec in wet AMD in the first half of 2025.

Regulatory Designations for Ixo-vec

In September 2018, we announced that the FDA had granted Ixo-vec Fast Track designation. Fast Track is a process designed to facilitate the development and expedite the review of drugs and biologics to treat serious conditions and fill unmet medical needs. In June 2022, we announced that the European Medicines Agency (“EMA”) had granted Ixo-vec Priority Medicines (“PRIME”) designation. PRIME is a voluntary scheme aimed at enhancing the EMA’s support for the development of medicinal products that target unmet medical needs. Eligible products must target conditions for which there is an unmet medical need (there is no satisfactory method of diagnosis, prevention or treatment in the EU or, if there is, the new medicinal product will bring a major therapeutic advantage) and they must demonstrate the potential to address the unmet medical need by introducing new methods of therapy or improving existing ones. In April 2023, we announced that the Medicines and Healthcare Products Regulatory Agency (“MHRA”) had granted Ixo-vec an Innovation Passport under the Innovative Licensing and Access Pathway (“ILAP”). The Innovation Passport is the first step in the ILAP process, triggering the MHRA and its partner agencies to partner with Adverum to charter a roadmap for regulatory and development milestones with the goal of early patient access in the United Kingdom (“UK”).

Ixo-vec Manufacturing

As we advance Ixo-vec for wet AMD, we are continuing to develop our manufacturing expertise for ongoing supply and implementing strategies for large-scale manufacturing and supply. We collaborate with external vendors to manufacture our viral banks, drug supply and drug product, while maintaining control of key aspects of the manufacturing process including development of scalable processes, assay development, and GMP quality controls. This approach to large-scale production is essential for addressing the needs of highly prevalent diseases like wet AMD and sets us apart from many existing gene therapies, which are approved or in development for conditions affecting smaller patient populations.

Financial Overview

Summary

We have not generated positive cash flow or net income from operations since our inception and, as of March 31, 2024, we had an accumulated deficit of $944.6 million. We expect to incur substantial expenses and continuing losses from operations in the foreseeable future as we conduct our research and development efforts, advance our product candidates through nonclinical 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.

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 contract research organizations (“CROs”) to carry out our clinical development and we do not have a sales organization.

We will need substantial additional funding in the future to support our operating activities as we advance our product candidates through nonclinical 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.

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On March 21, 2024, we effected a 1-for-10 reverse stock split of our common stock. The par value and the authorized shares of our common stock were not adjusted as a result of the reverse stock split. All equity-related information including per share amounts for all periods presented in this Quarterly Report on Form 10-Q have been adjusted retroactively, where applicable, to reflect this reverse stock split.

As of March 31, 2024, we had $193.3 million in cash, cash equivalents and short-term investments. On February 7, 2024, we completed a private placement of 10.5 million shares of our common stock and, in lieu of common stock, prefunded warrants to purchase an aggregate of 75,000 shares of common stock (the “Pre-Funded Warrants”) to certain institutional and accredited investors and a concurrent private placement to certain directors of 23,000 shares of our common stock for total gross proceeds of $127.8 million, before deducting placement agent fees and offering expenses (the “Private Placements”). We believe that our cash, cash equivalents and short-term investments are sufficient to fund our planned operations into late 2025. However, we may need to raise additional funds sooner as a result of a number of risks and uncertainties, including those set forth in Part II, Item 1A. Risk Factors – “We expect that our cash, cash equivalents, and short-term investments will be sufficient to fund our planned operations into late 2025. If this expectation proves to be wrong, we may be forced to delay, limit or terminate certain of our development efforts before then.”

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 nonclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and CROs that conduct and manage nonclinical 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 need to 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 may require increased expenses related to audit, legal and regulatory functions, as well as director and officer insurance premiums and investor relations costs.

Other Income, Net

Other income, net primarily comprises interest income on our cash equivalents and investments in marketable securities.

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Critical Accounting Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on 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 assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the expenses incurred during the reporting periods. We base our estimates on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

There have been no significant changes in our critical accounting judgments and estimates during the three months ended March 31, 2024 as compared to the critical accounting judgments and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our most recent Annual Report on Form 10-K filed with the SEC on March 18, 2024.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023


	Three Months Ended March 31,
			2024		2023		Change
		(In thousands)
License revenue			$	—	$	3,600	$	(3,600)
Operating expenses:
Research and development			15,410		21,059		(5,649)
General and administrative			11,429		12,780		(1,351)

Total operating expenses			26,839		33,839		(7,000)
Operating loss			(26,839)		(30,239)		3,400
Other income, net			2,052		1,200		852
Net loss before income taxes			(24,787)		(29,039)		4,252
Income tax provision			—		(17)		17
Net loss			$	(24,787)	$	(29,056)	$	4,269

License Revenue

The $3.6 million of license revenue for the three months ended March 31, 2023 was primarily related to a milestone payment received from Lexeo Therapeutics, Inc. (“Lexeo”) pursuant to a license agreement we had entered into with Lexeo in January 2021, pursuant to which we granted Lexeo an exclusive license to the intellectual property rights, pre-clinical data and knowhow associated with our Friedreich’s Ataxia program.

Research and Development Expense

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


	Three months ended March 31,				Increase/ (Decrease)
	2024		2023
	(In thousands)
Direct research and development expenses:
Ixo-vec	$	3,731	$	6,557	$	(2,826)
Other programs	620		1,652		(1,032)
Indirect research and development expenses:
Personnel related (including stock-based compensation)	8,124		8,850		(726)
Facilities and other unallocated research and development expenses	2,935		4,000		(1,065)
Total research and development expenses	$	15,410	$	21,059	$	(5,649)

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Research and development expense decreased by $5.6 million to $15.4 million for the three months ended March 31, 2024 from $21.1 million for the three months ended March 31, 2023. This overall decrease was primarily related to a decrease of $2.8 million in spending on Ixo-vec due to completion of two clinical trials, a decrease of $1.1 million in facilities expenses driven by a lease termination in the prior year, a decrease of $1.0 million in other programs arising from license costs driven by the Lexeo revenue, and a decrease of $0.7 million in personnel-associated costs due to restructuring expense in the prior year. Stock-based compensation expense included in research and development expenses was $1.1 million for the three months ended March 31, 2024, compared to $1.4 million for the three months ended March 31, 2023.

For the periods presented, our research and development activities were attributable to our Ixo-vec and earlier-stage research programs. We expect that research and development expenses will fluctuate in future periods as we focus on advancing Ixo-vec for the treatment of wet AMD.

General and Administrative Expense

General and administrative expense decreased $1.4 million to $11.4 million for the three months ended March 31, 2024 from $12.8 million for the three months ended March 31, 2023, primarily related to $0.7 million in depreciation on leasehold improvements driven by a lease termination in the prior year, $0.5 million in costs related to consultants and contractors, and decreases of $0.3 million in facilities costs. Stock-based compensation expense included in general and administrative expenses was $3.0 million for the three months ended March 31, 2024, compared to $3.2 million for the three months ended March 31, 2023.

Other Income, Net

Other income, net was $2.1 million for the three months ended March 31, 2024 and $1.2 million for the three months ended March 31, 2023 as a result of higher average invested balances.

Income Tax Provision

We recognized no income tax provision for the three months ended March 31, 2024, and $17,000 for the three months ended March 31, 2023, related to foreign operations.

Liquidity and Capital Resources

We have not generated positive cash flow or net income from operations since our inception and as of March 31, 2024, we had an accumulated deficit of $944.6 million. As of March 31, 2024, we had $193.3 million in cash, cash equivalents and short-term investments compared to $96.5 million as of December 31, 2023. On February 7, 2024, we completed Private Placements of 10.6 million shares of our common stock and, in lieu of common stock, pre-funded warrants to purchase an aggregate of 75,000 shares of common stock for total gross proceeds of $127.8 million, before deducting placement agent fees and offering expenses. Additionally, we are party to a sales agreement (the “Sales Agreement”) with Cowen & Company, LLC (“Cowen”) pursuant to which we may, from time to time, sell up to an aggregate amount of $100.0 million of our common stock through Cowen in an “at-the-market” offering. We are not required to sell shares under the Sales Agreement. We will pay Cowen a commission of up to 3.0% of the aggregate gross proceeds of any shares of common stock sold pursuant to the Sales Agreement. As of May 9, 2024, no sales have been made pursuant to the Sales Agreement. We believe that our existing cash and cash equivalents and short-term investments as of March 31, 2024 will be sufficient to fund our operations and meet our existing contractual obligations and other cash requirements into late 2025. However, we may need to raise additional funds sooner as a result of a number of risks and uncertainties, including those set forth in Part II, Item 1A. Risk Factors – “We expect that our cash, cash equivalents, and short-term investments will be sufficient to fund our planned operations into late 2025. If this expectation proves to be wrong, we may be forced to delay, limit or terminate certain of our development efforts before then.”

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. 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 nonclinical 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.

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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 nonclinical 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 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;

•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; and

•the emergence of competing technologies or other adverse market developments.

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


	Three Months Ended March 31,
	2024		2023
	(in thousands)
Net cash used in operating activities	$	(23,245)	$	(22,412)
Net cash (used in) provided by investing activities	(22,027)		21,533
Net cash provided by financing activities	119,880		—
Net increase (decrease) in cash and cash equivalents and restricted cash	$	74,608	$	(879)

Cash Used in Operating Activities

During the three months ended March 31, 2024, net cash used in operating activities was $23.2 million, primarily as a result of net loss of $24.8 million due to our continued research and development activities, partially offset by $5.3 million of non-cash charges mainly related to $4.2 million of stock-based compensation expense, $1.0 million of depreciation and amortization expenses, $0.5 million of non-cash lease expense, and by $3.8 million of change in operating assets and liabilities, which fluctuate due to timing of expenses and payments.

During the three months ended March 31, 2023, net cash used in operating activities was $22.4 million, primarily as a result of net loss of $29.1 million due to the continued activities developing our product candidates, partially offset by $6.6 million of non-cash charges mainly related to $4.6 million of stock-based compensation expense and $1.6 million of depreciation and amortization expenses.

Cash (Used in) Provided by Investing Activities

Net cash used in investing activities for the three months ended March 31, 2024 consisted of $21.9 million of net purchases from our marketable securities and $0.1 million of purchases of property and equipment.

Net cash provided by investing activities for the three months ended March 31, 2023 consisted of $21.6 million of maturities from our marketable securities, partially offset by $0.1 million of purchases of property and equipment.

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Cash Provided by Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2024 consisted mainly of $119.7 million of proceeds from issuance of common stock and pre-funded warrants in the Private Placements and $0.1 million of proceeds from the exercise of stock options.

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.

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 March 31, 2024. 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 March 31, 2024, 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 our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely discussion regarding required disclosure.

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.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

On April 9, 2024, the Delaware Court of Chancery entered an Order and Final Judgment approving settlement of a stockholder derivative action (Pazyuk v. Machado, et al., C.A. No. 2022-1062-MTZ), pursuant to which we agreed to implement and maintain certain limits to our non-employee director compensation policy, to be in effect for three years: (i) a $150,000 cap on non-employee director annual compensation while our market capitalization is below $250 million, (ii) a $250,000 cap on non-employee director annual compensation while our market capitalization is greater than $250 million and less than $500 million, (iii) a $400,000 cap on non-employee director annual compensation while our market capitalization is greater than $500 million and less than $1 billion, (iv) a $475,000 cap on non-employee director annual compensation while our market capitalization is greater than $1 billion and (v) a limit on the grant date fair value of one-time equity awards made to new directors equal to two times the grant date fair value of the annual option grant award made to continuing non-employee directors.

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.

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, marketing and other activities that, together with anticipated general and administrative expenses, will likely result in us incurring significant losses for the next several years or longer.

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 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 planned operations into late 2025. 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 late 2025. 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 t

SEC Form 10-Q filed by Adverum Biotechnologies Inc.