ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q. These forward-looking statements may include, but are not limited to, statements regarding our future results of operations and financial position, business strategy, market size, potential growth opportunities, timing and results of preclinical and clinical development activities, and potential regulatory approval and commercialization of product candidates. In some cases, forward looking-statements may be identified by terminology such as “believe,” “may,” “will,” “should”, “predict”, “goal”, “strategy”, “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “seek” and similar expressions and variations thereof. These words are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

As used in this Quarterly Report on Form 10-Q, the terms “Audentes,” “the Company,” “we,” “us,” and “our” refer to Audentes Therapeutics, Inc. and, where appropriate, its consolidated subsidiary, unless the context indicates otherwise.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report and with our audited consolidated financial statements and related notes thereto for the year ended December 31, 2016, included in our Annual Report on Form 10-K .

Overview

We are a biotechnology company focused on developing and commercializing gene therapy products for patients suffering from serious, life-threatening rare diseases caused by single gene defects. We believe that gene therapy has powerful potential to treat these diseases through delivery of a functional copy of the affected gene to cells, resulting in production of the normal protein. We have built a compelling portfolio of product candidates, including AT132 for the treatment of X-Linked Myotubular Myopathy, or XLMTM, AT342 for the treatment of Crigler-Najjar Syndrome, or Crigler-Najjar, AT982 for the treatment of Pompe disease and AT307 for the treatment of the CASQ2 subtype of Catecholaminergic Polymorphic Ventricular Tachycardia, or CASQ2-CPVT. The Investigational New Drug applications, or INDs, for both AT132 and AT342 are active, and our collaborating institution, the University of Florida, has an active IND to conduct a proof-of-concept study of AT982 delivered via intra-muscular injection in adults with Pompe disease. We are conducting IND-enabling preclinical studies for the systemic administration of AT982 for the treatment of Pompe disease and planning to conduct exploratory preclinical studies evaluating intrathecal delivery of AT982. We plan to file an IND for the systemic administration of AT982 in the first half of 2018. We are also conducting IND-enabling studies of AT307 and plan to file an IND in the fourth quarter of 2017. We expect to have preliminary clinical data from the AT132, AT342 and AT982 programs in the second half of 2017. We maintain full global rights to all our product candidates.

We have developed a proprietary in-house cGMP manufacturing capability that we believe provides us with a core strategic advantage, enabling superior control over development timelines, costs and intellectual property. Our manufacturing facility is located in South San Francisco in a building that we have improved to support our research, process development and manufacturing capabilities in accordance with current Good Manufacturing Practices, or cGMP, requirements. We believe we have established a comprehensive platform for production of our adeno-associated virus vector, or AAV, product candidates and plan continued investment to further optimize our manufacturing capabilities to cost-effectively produce high-quality AAV vectors at both clinical and commercial scale. We initiated cGMP manufacturing of our products in our facility in the second half of 2016.

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We have built our portfolio of product candidates in part by engaging in strategic transactions with third parties. In July 2013, we entered into a license agreemen t with REGENXBIO Inc., or REGENXBIO, pursuant to which we obtained intellectual property rights related to AT132 and AT982. In January 2014, we entered into a collaborative development agreement with Genethon, pursuant to which we acquired intellectual pro perty rights related to AT132 in exchange for granting Genethon the exclusive right to manufacture materials for preclinical and early clinical development, subject to Genethon’s ability to supply required quantities in accordance with applicable timelines , and the funding for certain research and development activities related to AT132. In July 2015, we entered into a license with the University of Florida Research Foundation, or UFRF, pursuant to which we obtained intellectual property rights related to A T982. In August 2015, in connection with our acquisition of Cardiogen Sciences, Inc., or Cardiogen, we acquired a license agreement with Fondazione Salvatore Maugeri, or FSM, pursuant to which we obtained a license to FSM’s intellectual property rights rel ated to AT307 and certain other products that we may develop related to the treatment of several additional inherited arrhythmias. That agreement was subsequently amended in May 2017 with FSM’s successor, Instituti Clinici Scientifici Maugeri S.p.A SB, or Maugeri, providing us with rights to develop gene therapies in indications related to CPVT along with an option for development in additional cardiac indications. In November 2015, we entered into two additional license agreements with REGENXBIO, pursuant to which we obtained intellectual property rights related to AT307 and AT342. In May 2016, we entered into a license and collaboration agreement with The Trustees of the University of Pennsylvania, or the University of Pennsylvania, pursuant to which we ob tained a license to develop and commercialize a gene therapy product for Crigler-Najjar. Upon execution of the license and collaboration agreement with the University of Pennsylvania, we met the conditions of a contractual milestone under our Crigler-Najja r license agreement with REGENXBIO, and made a required payment of $0.4 million to REGENXBIO. We paid the University of Pennsylvania an upfront fee of $0.5 million, $6.0 million for certain preclinical development activities and a $0.7 million milestone pa yment as a result of our active IND for AT342. We may be required to make additional milestone payments and pay royalties and other amounts to third parties pursuant to our license and collaboration agreements as we further develop and commercialize our pr oduct candidates.

Since our inception, we have devoted substantially all of our resources to: identifying, acquiring, and developing our product candidate portfolio; organizing and staffing our company; raising capital; developing our manufacturing capabilities; and providing general and administrative support for these operations. We have never generated revenue and have incurred significant net losses since inception. We do not expect to receive any revenue from any product candidates that we develop until we obtain regulatory approval and commercialize our product candidates or enter into collaborative agreements with third parties. Our net losses were $59.7 million and $26.5 million for the years ended December 31, 2016 and 2015, respectively, and $40.9 million and $24.6 million for the six months ended June 30, 2017 and 2016, respectively. As of June 30, 2017, we had an accumulated deficit of $141.3 million. We expect to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially as we:

We have funded our operations to date primarily from the issuance and sale of our convertible preferred stock and through the issuance and sale of our common stock pursuant to our initial public offering, or IPO, in July 2016 and our follow-on offering in April 2017. As of June 30, 2017, we had cash, cash equivalents and short-term investments of $145.0 million.

On April 24, 2017, we completed an underwritten public follow-on offering of 5,200,000 shares of common stock. As part of the underwritten public offering, on April 27, 2017 we issued an additional 755,151 shares of common stock representing the underwriters’ exercise of a majority of their option to purchase additional shares. All shares were offered by us at a price to the public of $14.50 per share. The aggregate net proceeds received by us from the offering were $80.6 million, net of underwriting discounts, commissions and offering costs.

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On March 7, 2017, we entered into a Loan and Security Agreement with Hercules Capital, Inc., or Hercules, pursuan t to which Hercules has made available to us a term loan in an aggregate principal amount of up to $20 .0 million. To date, we have not drawn any amounts under the loan agreement. In connection with entry into the loan agreement, we issued a warrant to Herc ules exercisable for 9,194 shares of our common stock.

To fund our current operating plans, we will need additional capital, which we may obtain through one or more equity offerings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our preclinical and clinical development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Financial Operations Overview

Research and Development Expenses

Research and development program expenses consist primarily of external costs incurred for the development of our product candidates, which include:

Personnel, non-program and unallocated program expenses include costs associated with activities performed by our internal research and development organization and generally benefit multiple programs. These costs are not separately allocated by product candidate and consist primarily of:

We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks performed by others using information and data provided to us by our vendors, collaborators and third-party service providers. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and as services are performed.

The largest component of our operating expenses has historically been our investment in research and development activities. However, we do not allocate personnel and other costs, such as salaries, benefits, stock-based compensation expense and indirect internal program costs to product candidates on a program-specific basis.

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

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We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, including investments in manufacturing, as our programs advance into later stages of development and we begin to conduct clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, facilities costs, including rent and maintenance of facilities, depreciation and amortization expense and other expenses for outside professional services, including legal, human resources, audit and accounting services. Personnel costs consist of salaries, bonuses, payroll taxes, benefits and stock-based compensation expense. We expect our general and administrative expenses to increase for the foreseeable future due to anticipated increases in headcount to advance our product candidates and as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the Securities and Exchange Commission, The NASDAQ Global Market, additional insurance expenses, investor relations activities and other administration and professional services.

Interest Income

Interest income consists of interest earned on our cash, cash equivalents and investments.

Other Income, net

Other income, net consists of foreign currency transaction gains and losses incurred during the period.

Critical Accounting Polices and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. 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 the reported 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 related to business combinations, contingent consideration payable, accrued research and development costs, and stock-based compensation expense are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Operations included in our Annual Report on Form 10-K for the year ended December 31, 2016.

Recent Accounting Pronouncements

Except as described in Note 2 to the Unaudited Interim Condensed Consolidated Financial Statements under the heading “Recent Accounting Pronouncements,” there have been no new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 2017, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2016, that are significant to us.

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Research and Development

Research and development expenses increased by $7.0 million, or 60%, to $18.8 million for the three months ended June 30, 2017. The increase was primarily due to a $2.0 million and $1.2 million increase in expenses related to our AT132 and AT307 programs, respectively, as we conducted additional preclinical studies, increased manufacturing of study materials and consulting costs and incurred initiation costs in preparation for clinical trials, a $1.8 million increase in personnel costs due to increased headcount and a $1.0 million increase for facility costs and depreciation primarily due to increased headcount and investment in manufacturing, a $0.6 million increase for stock-based compensation expense, and a $0.5 million increase for temporary staffing, consulting and non-program specific research expenses. We anticipate research and development expenses will continue to increase as we advance development of all our programs.

General and Administrative

General and administrative expenses increased by $1.6 million, or 65%, to $4.1 million for the three months ended June 30, 2017. The increase was primarily due to a $0.3 million increase in personnel costs and a $0.4 million increase in stock-based compensation expense due to increased headcount, a $0.2 million increase in professional services costs, a $0.1 million increase in facilities-related costs, and a $0.2 million increase in insurance costs. A significant portion of these increases were incurred due to operating as a public company and efforts to achieve and maintain regulatory compliance. We expect to continue to incur additional expenses related to our operations as a public company.

Interest Income, net

Interest income, net increased by $23,000, or 25%, to $115,000 for the three months ended June 30, 2017, as we invested the funds received from our IPO and follow-on offering into short duration fixed-income securities and recognized amortization of deferred financing costs related to our debt financing facility as interest expense.

Comparison of the six months ended June 30, 2017 and 2016

Research and Development

Research and development expenses increased by $13.7 million, or 70%, to $33.4 million for the six months ended June 30, 2017. The increase was primarily due to a $4.4 million, $1.3 million and $1.1 million increase in expenses related to our AT132,

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AT342 and AT307 programs, respectively, as we conducted additional preclinical studies, increased manufacturing of study materials and consulting fees and incurred initiation costs in preparation for clin ical trials, a $4.2 million increase in personnel costs due to increased headcount and a $ 1.9 million increase for facility costs and depreciation primarily due to increased headcount and investment in manufacturing, a $0 .6 million increase in other manufa cturing expenses not related to specific programs , and a $1.1 million increase for stock-based compensation expense . These increases were partially offset by a year over year reduction in expenses related to our AT982 program of $0.9 million . We anticipate research and development expenses will continue to increase as we advance development of all our programs.

General and Administrative

General and administrative expenses increased by $2.6 million, or 51%, to $7.7 million for the six months ended June 30, 2017. The increase was primarily due to a $0.6 million increase in personnel costs and a $0.7 million increase in stock-based compensation expense due to increased headcount, a $0.2 million increase in facilities-related costs, a $0.1 million increase in professional services costs, and a $0.4 million increase in insurance costs. Many of these increases were incurred due to operating as a public company and efforts to achieve and maintain regulatory compliance. We expect to continue to incur additional expenses related to our operations as a public company.

Interest Income, net

Interest income, net increased by $0.1 million, or 39%, to $0.3 million for the six months ended June 30, 2017, as we invested funds received from our IPO and follow-on offering into short duration, fixed-income securities and recognized amortization of deferred financing costs related to our debt financing facility as interest expense.

Liquidity, Capital Resources and Plan of Operations

Since our inception in 2012 through June 30, 2017, our operations have been financed solely by net proceeds of $135.8 million from the sale of shares of our convertible preferred stock and $155.8 million from the sale of common stock from our IPO and follow-on offering. As of June 30, 2017, we had $145.0 million in cash, cash equivalents, and short-term investments and an accumulated deficit of $141.3 million.

On April 24, 2017, we completed an underwritten public offering of 5,200,000 shares of common stock. As part of the offering, on April 27, 2017 we issued an additional 755,151 shares of common stock representing the underwriters’ exercise of a majority of their option to purchase additional shares. All shares were offered by us at a price to the public of $14.50 per share. The aggregate net proceeds received by us from the offering were $80.6 million, net of underwriting discounts, commissions and offering costs.

On March 7, 2017, we entered into a Loan and Security Agreement with Hercules, pursuant to which Hercules has made available to us a term loan in an aggregate principal amount of up to $20.0 million. To date, we have not drawn any amounts under the loan agreement. In connection with entry into the loan agreement, we issued a warrant to Hercules exercisable for 9,194 shares of our common stock.

To fund our current operating plans, we will need additional capital, which we may obtain through one or more equity offerings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our preclinical and clinical development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from our operating activities. 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 is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

We believe that our existing cash, cash equivalents and investments will be sufficient to meet our anticipated cash and capital expenditure requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We will continue to require additional financing to advance our current product candidates through clinical development, to develop, acquire or in-license other potential product candidates and to fund operations for the foreseeable future. We will continue to seek funds 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. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies.

Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.

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If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable term s, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our clinical trials, research and development programs or commercialization efforts. We may seek to raise any neces sary additional capital through a combination of public or private equity offerings, debt financings, and collaborations or licensing arrangements. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limi ting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If additional funding is required, there can be no assurance that additional funds will be available to us on a cceptable terms on a timely basis, if at all. If we are unable to raise capital, we will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on our ability to execute our business plans.

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

Cash Flows from Operating Activities

Cash used in operating activities for the six months ended June 30, 2017 was $38.6 million. Our net loss was $40.9 million, which was partially offset by noncash charges of $4.3 million, consisting primarily of $2.5 million of stock-based compensation expense, $1.5 million of depreciation and amortization expense, and a $0.2 million change in the fair value of the contingent acquisition consideration liability. The change in our net operating assets was primarily the result of an increase in our prepaid expenses, primarily for contractual research and development services, and other current assets by $0.8 million, a $2.0 million increase in long-term deposits and a decrease in our accounts payable and accrued liabilities by a net $0.3 million. In addition, we transferred $0.4 million to restricted cash related to our facility leases.

Cash used in operating activities for the six months ended June 30, 2016 was $31.2 million. Our net loss was $24.6 million which was partially offset by noncash charges of $1.5 million consisting primarily of $0.7 million of stock-based compensation expense, $0.2 million from amortization of discounts on investments, a $0.2 million change in the fair value of the contingent acquisition consideration liability, and $0.3 million of depreciation and amortization expense. The change in our net operating assets and liabilities for the period was due primarily to an increase in prepaid expenses of $4.8 million and a decrease in accounts payable and accrued liabilities of $0.2 million as our operations expanded. In addition, we transferred $4.7 million to restricted cash related to our facility leases.

Cash Flows from Investing Activities

Cash used in investing activities was $24.1 million for the six months ended June 30, 2017, primarily due to the purchases of marketable securities of $70.9 million and purchases of property and equipment of $2.2 million, partially offset by the sale or maturity of marketable securities of $49.0 million.

Cash used in investing activities was $28.5 million for the six months ended June 30, 2016, primarily related to the purchases of marketable securities of $42.0 million and purchases of property and equipment of $8.8 million, partially offset by the maturity or sale of marketable securities of $22.3 million.

Cash Flows from Financing Activities

Cash provided by financing activities for the six months ended June 30, 2017 and 2016 were related to proceeds from the exercise of stock options of $0.4 million and $0.1 million, respectively. In addition, for the six months ended June 30, 2017, we received $80.6 million in net proceeds from our follow-on offering, net of underwriting discounts, commissions and offering costs.

Off-Balance Sheet Arrangements

At June 30, 2017, we were not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

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Co ntractual Obligations and Other Commitments

Debt Obligations

On March 7, 2017, we entered into a Loan and Security Agreement with Hercules, pursuant to which Hercules has made available to us a term loan in an aggregate principal amount of up to $20.0 million, which may be drawn at certain times as specified in the Loan Agreement. Any borrowings made pursuant to the Loan Agreement will bear interest at a rate equal to the greater of either (i) 7.95% plus the prime rate as reported in the Wall Street Journal minus 3.75%, and (ii) 7.95%. The term loan matures on December 1, 2020. We will begin to repay the aggregate principal amount that is outstanding, if any, in equal monthly installments of principal and interest beginning on July 1, 2018, or if certain clinical development or financing milestones are achieved, beginning on certain dates in 2019, until the term loan maturity or such earlier date when secured obligations are repaid. We may voluntarily prepay the term loan at any time, subject to a 2.0% premium for 12 months and a 1.0% premium after 12 months but prior to 24 months. Certain mandatory prepayments are required upon a Change in Control (as defined in the Loan Agreement). Upon the earliest of full repayment of the term loan, or if no amounts are borrowed, on December 16, 2017, we are required to pay Hercules the greater of $0.2 million or 5.40% of the aggregate amount of any amounts borrowed under the agreement. As of June 30, 2017, we had not borrowed any amounts under the Loan Agreement.

Lease Agreements

In January 2017, we entered into a lease agreement for approximately 7,555 square feet of research and development offices in South San Francisco, California with total minimum lease payments of $0.4 million over an approximately three-year term.

In July 2015, we entered into a sub-lease agreement for approximately 22,000 square feet of manufacturing space in South San Francisco, California for an initial term that expires in May 2017 with total minimum lease payments due of $0.9 million. In November 2015, we purchased an option that was subsequently exercised in May 2016 to enter into a ten-year lease for the existing 22,000 square feet plus approximately 17,000 additional square feet of manufacturing space, which was executed in January 2017 and became effective in June 2017.

In April 2016, we entered into a sublease agreement for approximately 8,983 square feet of research and development laboratory space in South San Francisco, California with an initial term that expires in January 2018 and total minimum lease payments of $0.6 million. In July 2017, we executed a lease agreement for this space to commence in February 2018 for an eight-year term with minimum lease payments of $13.8 million

License and Collaboration Agreements

During the first quarter of fiscal 2017, we entered into a services and collaboration agreement for the treatment of Crigler-Najjar Syndrome related to our AT342 development program. The agreement has a term of ten years and provides that we will pay a specified minimum fee to the service provider for each year that the program is under development that ranges from $0.1 million to $0.4 million per year in addition to payments for services provided. Following commercialization of AT342, we are obligated to pay the service provider a 1% royalty based on net sales, as defined under the agreement, subject to a contractual minimum of $0.2 million during the first three years of commercialization.

During the second quarter of 2017, we entered into an amended license agreement with Instituti Clinici Scientifici Maugeri S.p.A SB, or Maugeri, the successor to Fondazione Salvatore Maugeri, or FSM, related primarily to our CPVT development program. The amended agreement provides for development milestone payments to Maugeri totaling up to 0.6 million Euro and maintains a low single-digit royalty based on net sales as per the original agreement. The amended agreement also provides us with an option to develop gene therapies in additional cardiac indications. In conjunction with the amended license agreement, we also entered into a sponsored research agreement with Maugeri requiring an upfront payment of 0.4 million Euro and a minimum two-year funding commitment for research totaling 0.6 million Euro.

Other Contracts

We also enter into contracts in the normal course of business with various third parties for services related to preclinical research studies, clinical trials, testing, manufacturing and other services. These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

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