Vera Therapeutics, Inc. (VERA) FY 2023 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and the related notes included elsewhere in this Annual Report.

In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations, and involve risks and uncertainties. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

Overview

We are a late clinical-stage biotechnology company focused on developing and commercializing transformative treatments for patients with serious immunological diseases. IgAN is a B cell disorder with a kidney pathology. Our lead product candidate, atacicept, is an at home, self-administered TACI-Fc fusion protein that blocks both BAFF and APRIL with best-in-class potential for the treatment of IgAN. The Phase 2b ORIGIN clinical trial evaluating the safety and efficacy of atacicept in participants with IgAN reported positive results at three timepoints: 24-week topline results in January 2023, 36-week results in June 2023, and 72-week results in January 2024. The trial remained blinded through 36 weeks, after which all participants were eligible for the open label extension portion of the study and received atacicept 150 mg through 96 weeks. At 24 and 36 weeks, respectively, atacicept met its primary endpoint with statistically significant reductions in UPCR on atacicept 150 mg, and stable eGFR was observed for participants on atacicept, with clinically meaningful and statistically significant difference versus placebo. Participants treated with atacicept demonstrated reductions in Gd-IgA1, the autoantigen produced by B cells in patients with IgAN, and a reduction in hematuria. The improvements in Gd-IgA1, hematuria, UPCR and eGFR represent the quartet of findings consistent with IgAN disease modification. The 72-week open label extension results showed consistent and sustained reductions in Gd-IgA1, hematuria, UPCR and continued eGFR stabilization. Additionally, atacicept’s safety profile was comparable to placebo. We advanced atacicept 150 mg in a pivotal Phase 3 clinical trial in IgAN in the second quarter of 2023. We believe that atacicept has pipeline in a molecule potential, with potential application in additional indications including SLE and LN, a severe renal manifestation of SLE. We have designed and are poised to conduct a Phase 3 clinical trial of atacicept in LN, based on feedback from the FDA’s review of clinical results in a Phase 2 clinical trial of atacicept in SLE patients with HDA. We also hold worldwide, exclusive development and commercial rights to MAU868, a potentially first-in-class monoclonal antibody to treat reactivated BKV infections, for which we completed a Phase 2 clinical trial in 2022. In January 2023, we delayed enrollment in the pivotal Phase 3 trial for LN and commitment of resources to the MAU868 program. We believe that our current pipeline programs leverage the deep expertise of our team and have strong potential commercial synergies. We hold global developmental and commercial rights to all of our pipeline molecule.

Since our inception, we have devoted substantially all of our resources to our research and development efforts, pre-clinical studies and clinical trials, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.

We do not have any product candidates approved for commercial sale, and we have not generated any revenue from product sales. Our ability to generate revenue sufficient to achieve profitability, if ever, will depend on the successful development and eventual commercialization of one or more of our product candidates, which we expect will take a number of years. We also do not own or operate, and currently have no plans to establish, any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for nonclinical and clinical testing, as well as for commercial manufacturing if any of our product candidates obtain marketing approval. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of our product candidates.

To date, we have funded our operations primarily through proceeds from the sale of shares of our common stock, redeemable convertible preferred stock, debt financing and convertible promissory notes. As of December 31, 2023, we had $160.7 million in cash, cash equivalents and marketable securities, compared to $114.7 million as of December 31, 2022.

We have incurred significant operating losses since the commencement of our operations. Our net losses were $96.0 million and $89.1 million for the years ended December 31, 2023 and 2022, respectively, and we expect to incur significant and increasing losses for the foreseeable future as we continue to advance our product candidates, atacicept and MAU868, to commercialization. Our net losses may fluctuate significantly from period to period, depending on the timing of expenditures on our research and development activities. As of December 31, 2023, we had an accumulated deficit of $309.1 million, compared to $213.1 million as of December 31, 2022. Our primary use of cash is to fund operating expenses, which consist of research and development expenditures and general and administrative expenditures. Cash used to fund operating expenses depends on the timing of when we pay these expenses, as reflected in the changes in our working capital balances.

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We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. We expect our expenses and capital requirements will increase significantly in connection with our ongoing activities as we:

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continue our ongoing and planned development of our product candidates, atacicept for the treatment of IgAN and LN, and MAU868 for the treatment of BK viremia;

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conduct clinical trials and nonclinical studies for atacicept and MAU868;

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seek regulatory approvals for any product candidates that successfully complete clinical trials;

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continue to scale up external manufacturing capacity with the aim of securing sufficient quantities to meet our capacity requirements for clinical trials and potential commercialization;

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establish a sales, marketing and distribution infrastructure to commercialize any approved product candidates and related additional commercial manufacturing costs;

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develop, maintain, expand, protect and enforce our intellectual property portfolio, including patents, trade secrets and know-how;

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attract, hire and retain additional clinical, scientific, quality control, and manufacturing management and administrative personnel; and

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add clinical, operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.

We also expect to increase the size of our administrative function to support the growth of our business. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

We will require substantial additional funding to develop our product candidates and support our continuing operations. Until such time that we can generate significant revenue from product sales or other sources, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources, which could include income from collaborations, strategic partnerships, or marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide. Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including requiring us to have to delay, reduce or eliminate our product development or future commercialization efforts. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. We cannot provide assurance that we will ever be profitable or generate positive cash flow from operating activities.

Geopolitical and Macroeconomic Developments

Due to geopolitical and macroeconomic events, including ongoing military conflicts, inflation and the actions taken by governments to address inflation and lingering effects of the COVID-19 pandemic, the U.S. and global financial markets experienced volatility, which has led to disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally. As a result of these factors and other geopolitical and macroeconomic developments described in this Annual Report, our business and results of operations may be adversely affected.

Although we did not see a significant financial impact to our business operations as a result of recent geopolitical and macroeconomic developments during the year ended December 31, 2023, there may be potential impacts to our business in the future that are highly uncertain and difficult to predict such as disruptions or restrictions in our supply chain, disruption or restrictions on our employees’ ability to travel, disruptions to or delays in ongoing non-clinical trials, clinical trials, third-party manufacturing supply and other operations, adverse geopolitical and macroeconomic concerns, interruptions or delays in the operations of the FDA or other regulatory authorities, continued increases in inflation and interest rates, or changes in availability and cost of credit and our ability to raise capital and conduct business development activities. The ultimate impact of these geopolitical and macroeconomic developments, as well as any lasting effects on our business, is highly uncertain and subject to continued change, and we recognize that macroeconomic and geopolitical factors may continue to present unique challenges for us.

We believe that our existing cash, cash equivalents and marketable securities held as of December 31, 2023, will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the date of this Annual Report. However, should adverse geopolitical and macroeconomic events, such as ongoing military conflicts, related sanctions, any recession or depression associated with those events or other events described herein, continue for a prolonged period, our results of operations,

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financial condition, liquidity and cash flows could be materially impacted as a result of a lower likelihood of effectively and efficiently developing and successfully commercializing our product candidates.

Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022.

* Not meaningful

Research and Development Expenses

Research and development expenses represent a substantial portion of our operating expenses. Our research and development expenses consist primarily of direct and indirect expenses incurred in connection with the research and development of our product candidates. Direct expenses include costs incurred under agreements with third parties, including contract research organizations, contract drug manufacturing organizations and consultants directly related to our research and development of product candidates, and license and milestone fees incurred as a result of our contractual obligations for our development candidates. Indirect expenses include employee compensation and other personnel-related expenses, including stock-based compensation, facilities and depreciation related to buildings and equipment used by research and development personnel and activities and other expenses.

Research and development expenses are recorded as expense in the period in which the related activities occurred, and payments we make prior to the receipt of goods or services to be used in research and development efforts are deferred as prepaid expenses until the goods or services are received and used. We accrue expenses for contract research and development as the related services are performed by monitoring the status of specified activities and billings received from our external service providers. These expenses are accrued based on estimates and are adjusted as actual expenses become known. The cost incurred in obtaining technology licenses, including initial and subsequent milestone payments incurred under our licensing agreements, are recorded as expense in the period in which they are incurred, as the licensed technology, method or process has no alternative future uses other than for our research and development activities. Where contingent milestone payments are due to third parties under license or other agreements, the milestone payment obligations are recognized as expense when achievement of the contingent milestone is probable, which is generally upon achievement of the milestone.

The following table summarizes our research and development expenses incurred during the respective periods.

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Research and development expenses increased by $9.2 million, or 13%, to $78.2 million in the year ended December 31, 2023, from $69.0 million in the year ended December 31, 2022. The increase was primarily due to progressing clinical development of atacicept in IgAN, including expenses incurred related to manufacturing drug supply for clinical trials. Contract drug manufacturing expenses increased by $7.5 million primarily due to production of atacicept drug supply for our ORIGIN 3 clinical trial and development of an atacicept auto-injector combination product. Compensation and related benefits for research and development employees, including stock-based compensation, increased by $5.6 million due to growth in research and development headcount. In 2022, we recorded license and milestone expense of $3.7 million as a result of an amendment to the Novartis License that was assigned to us in connection with our purchase of MAU868 and certain related assets from Amplyx. Clinical trial expenses decreased by $0.9 million due to a decrease in expenses for the COMPASS trial in 2023 following our announcement to delay enrollment in this trial to prioritize and focus resources on our ORIGIN 3 clinical trial.

We expect our research and development expenses to increase in future periods as we continue to support our ongoing ORIGIN 3 Phase 3 clinical trial and prepare to seek regulatory approval of atacicept in IgAN, and if we resume development of other indications or product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation and personnel-related expenses, including stock-based compensation, for our personnel in executive management, legal, finance, human resources, and other administrative functions. General and administrative expenses also include professional fees paid for accounting, auditing, legal, tax and consulting services, and other general overhead costs to support our operations. General and administrative expenses are recorded as expense in the period in which incurred, and payments we make prior to the receipt of goods or services to be used for general and administrative purposes efforts are deferred as prepaid expenses until the goods or services are received and used.

General and administrative expenses increased by $1.9 million, or 9%, to $23.8 million in the year ended December 31, 2023, from $21.9 million in the year ended December 31, 2022, due primarily to an increase of $4.6 million of payroll and related expenses, including stock-based compensation, as a result of increased general and administrative employee headcount, partially offset by a decrease of $1.2 million in legal expenses, a decrease of $0.9 million in insurance premium expenses, and a decrease of $0.6 million in recruiting and placement fees.

Other Income, Net

Other income, net, increased by $4.2 million, or 226%, to $6.0 million in the year ended December 31, 2023, from $1.8 million in the year ended December 31, 2022, primarily due to an increase of $6.2 million in interest income from investments in marketable securities. In addition, other expense recognized due to the change in fair value of non-marketable equity securities was $0.8 million lower in the current year. The increase in interest income was partially offset by a $2.8 million increase in interest expense from the

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Oxford Loan Agreement, under which an additional $20.0 million and $25.0 million was funded in November 2022 and December 2023, respectively.

Liquidity and Capital Resources

To date, we have funded our operations primarily through proceeds from the sale of shares of our common stock, redeemable convertible preferred stock, debt financing and convertible notes. From our inception through December 31, 2023, we have raised aggregate net cash proceeds of approximately $427.3 million from the issuance and sale of redeemable convertible preferred stock, convertible notes and common stock, and proceeds from our Loan Agreement with Oxford. Since the date of our incorporation, we have not generated any revenue from product sales and have incurred substantial operating losses and negative cash flows from operations.

In February 2024, we completed a follow-on public offering and issued 9,274,194 shares of common stock for net proceeds of approximately $269.6 million, after deducting underwriting discounts and commissions and offering related expenses.

We use our cash to fund operations, primarily to fund our research and development efforts, clinical trials, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations. Cash used to fund operating expenses is affected by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid assets.

We anticipate that we will continue to incur net losses for the foreseeable future as we continue research and development activities of atacicept and MAU868, hire additional staff, including clinical, operational, administrative and management personnel, and incur additional expenses associated with operating as a public company. We expect to incur significant expenses and operating losses for the foreseeable future as we advance our clinical development activities and our product candidate portfolio. We expect that our research and development and general and administrative costs will increase substantially in connection with conducting additional clinical trials and clinical trials for our research programs and product candidates, contracting with third parties to support nonclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements, or other sources.

As of December 31, 2023, we had cash, cash equivalents and marketable securities of $160.7 million, as compared to $114.7 million as of December 31, 2022. We believe, based on our current operating plan, that our cash, cash equivalents and marketable securities as of December 31, 2023, and the net proceeds from our February 2024 follow-on public offering, will be sufficient to fund our operations and capital expenditure requirements for at least 12 months subsequent to the issuance date of the financial statements appearing elsewhere in this Annual Report.

Cash Flows

The following table summarizes our cash flows for the periods indicated.

Operating Activities

For the year ended December 31, 2023, we used $92.2 million of cash in operating activities, attributable to a net loss of $96.0 million, partially offset by non-cash charges of $9.7 million and a net change in our net operating assets and liabilities of $5.9 million. Non-cash charges primarily consisted of $11.5 million of stock-based compensation, $4.1 million of depreciation, amortization and accretion, and a $2.2 million reduction in the carrying amount of operating lease right-of-use assets. The change in our net operating assets and liabilities was primarily due to a decrease of $2.6 million in operating lease liabilities, a decrease of $2.2 million in accrued and other current liabilities and a decrease of $0.9 million in accounts payable.

For the year ended December 31, 2022, we used $67.6 million of cash in operating activities, attributable to a net loss of $89.1 million, partially offset by non-cash charges of $14.7 million and a net change in our net operating assets and liabilities of $6.7 million. Non-cash charges primarily consisted of $8.9 million of non-cash stock based compensation expense, $0.8 million of depreciation, amortization, and accretion, $2.3 million reduction in the carrying amount of operating lease right-of-use assets, and $3.7 million of

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non-cash license and milestone expenses. The change in our net operating assets and liabilities was primarily due to a $8.2 million increase in prepaid expenses and other current assets, and a $2.6 million decrease in operating lease liabilities, partially offset by a $10.6 million increase in accounts payable, a $7.0 million increase in accrued and other current liabilities.

Investing Activities

For the year ended December 31, 2023, our investing activities used $39.4 million of cash, primarily resulting from the purchase of short-term marketable securities, less sales and maturities of short-term marketable securities during the year.

For the year ended December 31, 2022, our investing activities used $70.6 million of cash, primarily resulting from the purchase of short-term marketable securities, less maturities of short-term marketable securities during the year.

Financing Activities

For the year ended December 31, 2023, our financing activities provided $133.5 million of cash resulting from $115.0 million gross proceeds received from our February 2023 follow-on offering, $24.7 million of net cash proceeds from the issuance of debt to Oxford and $1.1 million proceeds from exercise of stock options and issuance of shares under our employee stock purchase plan, less $7.3 million offering costs related to our follow-on offering, including underwriting discounts and commissions.

For the year ended December 31, 2022, our financing activities provided $101.9 million of cash resulting from $86.1 million gross proceeds received from our February 2022 follow-on offering, $19.8 million of net cash proceeds from the issuance of debt to Oxford and $2.1 million proceeds from exercise of stock options and issuance of shares under our employee stock purchase plan, less $6.2 million offering costs related to our follow-on offering, including underwriting discounts and commissions.

Contractual Obligations

We enter into agreements in the normal course of business with various third parties for preclinical, clinical and other services. These contracts are generally cancellable without material penalty upon written notice.

Our operating lease obligations reflect our lease obligations for our office space in Brisbane, California, and our office and life science research space in South San Francisco, California.

In November 2021, we entered into a lease agreement for our headquarters office space in Brisbane, California, which was amended in July 2022 to add approximately 5,000 square feet of office space in the same building adjacent to this location. The term of the lease amendment is 27 months from September 2022, and the base rent is approximately $0.3 million for the first 12 months with scheduled annual 3% increases. The lease includes renewal options.

Loan and security agreement

On December 17, 2021, we entered into the Loan Agreement with Oxford, a Delaware limited liability company, as lender (Lender) and collateral agent. The Loan Agreement provides for a term loan (the Loan) in an aggregate maximum principal amount of $50.0 million, of which $5.0 million was funded on December 17, 2021, $20.0 million was funded on November 4, 2022, and the remaining $25.0 million was funded on December 22, 2023.

In March 2023, we opted to extend the final maturity date of the Loan from December 2026, to December 2027, based on positive Phase 2b clinical trial data of atacicept in IgAN, as provided in the Loan Agreement. We are required to make monthly interest-only payments for 60 months followed by full amortization through maturity.

Initially, through December 30, 2021, the Loan incurred interest at a per annum rate of 8.254%. Thereafter, the Loan bears interest at a floating per annum rate (based on the actual number of days elapsed divided by a year of 360 days) equal to the greater of (i) 8.25% and (ii) the sum of (a) 1-Month CME Term SOFR as reported by CME Group Benchmark Administration Limited on the last business day of the month that immediately precedes the month in which the interest will accrue, and (b) 8.25%.

We are permitted to prepay the Loan in full or in part at any time upon 10 business days’ written notice to the Lender, subject to the applicable Prepayment Fee (as defined below). Upon the earliest to occur of the maturity date, acceleration of the Loan or prepayment of the Loan, we are required to make a final payment equal to 7.0% of the aggregate principal amount of the Loan (the Final Fee). Any prepayments of the Loan, whether mandatory or voluntary, must include an amount equal to the sum of (a) the portion of the outstanding principal of the Loan being prepaid plus accrued and unpaid interest thereon through the prepayment date, (b) the Final Fee, (c) the Lender’s expenses and all other obligations that are due and payable to the Lender, and (d) a prepayment fee of (i) 3.0% of the portion of the Loan being prepaid if the repayment is on or before the first anniversary of the funding date of such term loan or (ii) 2.0% of the portion of the Loan being prepaid if the repayment is after the first anniversary of the funding date but on or before the second anniversary of the funding date of such term loan (the Prepayment Fee). There is no Prepayment Fee for any prepayments occurring after the second anniversary of the funding date of such term loan.

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Our obligations under the Loan Agreement are secured by a security interest in all of our assets, other than our intellectual property, which is subject to a negative pledge. The Loan Agreement does not contain any financial related covenants. Included in the Loan Agreement are customary representations and covenants that, subject to exceptions, restrict our ability to, among other things: declare dividends or redeem or repurchase equity interests; incur additional liens; make loans and investments; incur additional indebtedness; engage in mergers, acquisitions and asset sales; transact with affiliates; undergo a change in control; add or change business locations; and engage in businesses that are not related to our existing business.

Upon the occurrence of an event of default, a default interest rate of an additional 5.0% may be applied to the outstanding loan balances, and the Lender may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Loan Agreement. Events of default under the Loan Agreement include customary events of default, including, but not limited to: (i) failure to (a) make any payment of principal or interest on its due date, or (b) pay any other obligations within three business days after such obligations are due and payable; (ii) failure to perform any obligation under specified covenants; (iii) the occurrence of a material adverse change; (iv) we or any of our subsidiaries being or becoming insolvent, beginning an insolvency proceeding, or becoming subject to an insolvency proceeding that is not dismissed or stayed within 45 days; (v) a default under any agreement with a third party resulting in a right by such third party to accelerate the maturity of any indebtedness in an amount in excess of $500,000 or that could reasonably be expected to have a material adverse change; (vi) the rendering of judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least $500,000 that remain unsatisfied, unvacated, or unstayed for a period of 10 days after the entry thereof; (vii) revocation, rescission, suspension or adverse modification of any governmental approval, or non-renewal of a governmental approval in the ordinary course for a full term, that could reasonably be expected to result in a material adverse change; and (viii) failure of a lien created under the Loan Agreement or any other loan document to constitute a valid and perfected lien on any of the collateral purported to be secured thereby, subject to no prior or equal lien, other than permitted liens.

At-the-Market Offering

In June 2022, we entered into a sales agreement with Cowen and Company LLC (Cowen) as sales agent, pursuant to which we may issue and sell shares of our common stock for an aggregate maximum offering price of $150.0 million under an at-the-market offering program (ATM). We will pay Cowen up to 3.0% of gross proceeds of the common stock sold through the ATM. Effective January 29, 2024, we suspended and terminated the prospectus related to the sale of common stock under the ATM. As a result, we will not make any sales of common stock pursuant to the ATM unless and until a new prospectus, prospectus supplement or registration statement is filed.

Emerging growth company status

We are an emerging growth company, as defined in the JOBS Act. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company under the JOBS Act until the earliest of (i) the last day of our first fiscal year in which we have total annual gross revenue of $1.235 billion or more, (ii) the date on which we have issued more than $1.0 billion of non-convertible debt instruments during the previous three fiscal years, (iii) the date on which we are deemed a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates, or (iv) December 31, 2026. Based on our current public float, we anticipate that when we reevaluate our filer status on June 30, 2024, we will determine that we qualify as a “large accelerated filer” for the year ending December 31, 2025.

Critical Accounting Policies and Significant Judgments and Estimates

The discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these 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 financial statements, as well as expenses incurred during the reporting periods. Our estimates are based 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 under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

While our significant accounting policies are described in the notes to our financial statements, we believe that the following critical accounting policies and estimates are most important to understanding and evaluating our reported financial results.

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Research and development contract costs, and related prepaid and accrued balances

We enter into various research and development and other agreements with commercial firms, researchers and others for provisions of goods and services from time to time. These agreements are generally cancellable, and the related costs are recorded as research and development expenses as incurred. We record accruals for estimated ongoing research and development costs. When evaluating the adequacy of the accrued liabilities, we analyze progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the prepaid and accrued balances at the end of any reporting period. Actual results could differ materially from our estimates.