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, 2017, included in our Annual Report on Form 10-K .

Business Overview

We are a clinical stage biotechnology company focused on developing and commercializing gene therapy products for patients living with 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 gene to affected 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, AT982 for the treatment of Pompe disease, AT342 for the treatment of Crigler-Najjar Syndrome, or Crigler-Najjar, and AT307 for the treatment of the CASQ2 subtype of Catecholaminergic Polymorphic Ventricular Tachycardia, or CASQ2-CPVT. We have ongoing Phase 1/2 clinical trials of AT132 for the treatment of XLMTM and AT342 for the treatment of Crigler-Najjar.  We have an active Investigational New Drug application, or IND, for AT307 for the treatment of CASQ2-CPVT, and we are conducting IND-enabling preclinical studies of AT982 for the treatment of Pompe disease, for which we plan to submit an IND in 2019.  We have a research initiative underway focused on the design and development of a novel AAV-based therapeutic for a rare neuromuscular disease with significant unmet medical need and meaningful commercial potential. We maintain full global rights to all of our product candidates.

We have developed a proprietary in-house cGMP manufacturing capability to produce our adeno-associated viral vector, or AAV, product candidates, providing us with a core strategic capability, and enabling superior control over development timelines, costs and intellectual property. Our manufacturing facility is located in South San Francisco and supports our process and analytical development, fill-finish, quality control testing and manufacturing operations in accordance with current Good Manufacturing Practices, or cGMP, requirements. We have designed and commissioned the facility to support the unique licensing requirements as promulgated by both the U.S. Food and Drug Administration, or FDA, and European Medicines Agency, or EMA, and we have initiated Biologic License Application, or BLA, readiness and validation activities for our XLMTM program. Operating at a 2x500 liter bioreactor scale, we believe our current manufacturing capacity is sufficient to meet the anticipated global commercial demands of our XLMTM and Crigler Najjar product candidates, and the development needs of our Pompe disease program and our research

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initiative for a rare neuromuscular disease . Additionally, we have the ability to add up to 5,000 liters of additional capa city within our existing lease footprint. We plan to continue investment in these capabilities to maintain our manufacturing leadership and enable the cost-effective production of high-quality AAV vectors to support our clinical development and commerciali zation activities.

Recent Developments

AT132

On October 5, 2018, we presented new positive interim data from ASPIRO, our Phase 1/2 clinical study of AT132 in XLMTM, at the 23rd International Annual Congress of the World Muscle Society (WMS).  The data reported in this presentation included follow-up assessments ranging from 4 to 48 weeks for the first eight patients enrolled in ASPIRO, including the seven patients enrolled in Cohort 1 (1x10 ¹⁴ vg/kg dose; six treated and one untreated control) and one patient enrolled to date in Cohort 2 (3x10 ¹⁴ vg/kg dose).  Key assessments included neuromuscular function as measured by CHOP INTEND; respiratory function as measured by maximal inspiratory pressure (MIP) and ventilator dependence; and vector transduction, transgene expression and histological improvement as assessed via muscle biopsy.  

As of the WMS presentation, AT132 was generally well tolerated with a manageable safety profile at doses up to 3x10 ¹⁴  vg/kg.  Data showed significant improvements in neuromuscular and respiratory function as assessed via CHOP INTEND and MIP in all treated patients, including the Cohort 2 sentinel patient.  All treated patients in Cohort 1 showed significant reductions in ventilator use, and three patients had achieved ventilator independence.  Week 24 muscle biopsies showed evidence of highly efficient tissue transduction as indicated by vector copy number and robust myotubularin protein expression as assessed by Western blot.  Histological analyses also showed significant improvements in myofiber size, nuclear peripheralization and organelle localization .

Subsequent to the presentation at WMS, we have completed enrollment in Cohort 2 of ASPIRO, including three patients treated at a dose of 3x10 ¹⁴ vg/kg and one untreated control patient.  In the fourth quarter of 2018, we plan interactions with the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) under our recently awarded RMAT and PRIME designations, respectively.  Our goal in these meetings is to initiate discussions regarding the development plans and potential registration pathway for AT132.

AT982

Earlier in the year, we presented the results of a comprehensive construct selection study conducted in a Pompe mouse model, and subsequently announced our intent to progress an AT982 candidate vector into clinical development.  This vector incorporated a novel hybrid promoter designed to express the GAA protein in skeletal and cardiac muscle, and the nervous system, and included a liver enhancer element which was shown in animal models to provide a favorable immunogenicity profile.  In order to

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strengthen our planned global clinical trial applications, we also announced our intent to conduct a toxicology study in non-human primates, or NHPs, to support our expanded vision to develop AT982 for both infantile and late onset Pompe disease patients.   Last quarter, we reported that d uring the conduct of this NHP study, we observed a dose-dependent safety signal, resulting in the early termination of the study .

A thorough analysis of our nonclinical studies has now been completed, and we have determined the mechanism of the dose dependent safety signal observed in the NHP toxicology study.  Additional IND-enabling studies are underway in the Pompe mouse model and we plan to file an IND in our Pompe program in 2019.

License Agreements

We have built our portfolio of product candidates in part by engaging in license and collaboration agreements as well as strategic transactions with third parties. In July 2013, we entered into a license agreement with REGENXBIO Inc., or REGENXBIO, pursuant to which we obtained intellectual property rights related to AT132 and AT982. In January 2014, we entered into an agreement with Genethon pursuant to which we acquired intellectual property rights related to AT132 in exchange for the payment of certain development milestones and royalties on net sales. 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 related 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, Istituti Clinici Scientifici Maugeri S.p.A SB, or ICSM, 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 obtained a license to develop and commercialize a gene therapy product for Crigler-Najjar.

Under these licensing, collaboration, and strategic arrangements for technologies that are incorporated into our product candidates, we are contractually committed to payments for licensing fees, services, and royalties, in addition to contingent payments upon achievement of certain development and commercialization milestones.

Financial Overview

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 $90.2 million, $59.7 million and $26.5 million for the years ended December 31, 2017, 2016 and 2015, respectively, and $93.2 million and $65.9 million for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, we had an accumulated deficit of $283.9 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, through the issuance and sale of our common stock pursuant to our initial public offering, or IPO, in July 2016, a follow-on offering in April 2017,

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pursuant to an “at-the-market” program and sales agreement, or ATM, we entered into with Cowen and Company, LLC, or Cowen from August 2017 through January 2018 , an additional follow-on offering in January 2018 , a n additio nal ATM facility with Cowen that began in March 2018 and an additional follow-on offering in October 2018 . As of September 30, 2018 , we had cash, cash equivalents , marketable securities and restricted cash of $ 285.5 million, which includes approximately $ 3 .6 million of restricted cash and approximately $ 1.3 million of long-term investments .

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 direct 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 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. We do not allocate personnel and other costs, such as salaries, benefits, stock-based compensation expense and certain internal program costs to product candidates on a program-specific basis.

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

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 anticipated increase in headcount and investments in manufacturing, as our programs advance into later stages of development and as we 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 and support the development of our product candidates and as a result of our operations as a public company, including expenses related to compliance with the rules and regulations of the Securities and Exchange Commission, The Nasdaq Global Market, and other governing bodies in addition to insurance expenses, investor relations activities and other administration, accounting and professional services.

Interest Income

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

Other Income (Expense), Net

Other income (expense), net primarily consists of gains and losses on disposals of property and equipment, investment management fees and foreign currency transaction gains and losses incurred during the period.

Critical Accounting Policies 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 and contingent consideration payable 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, 2017.

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Recent A ccounting 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 nine months ended September 30, 2018, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2017, that are significant to us.

Research and Development

Research and development expenses increased by $9.0 million, or 43%, to $29.9 million for the three months ended September 30, 2018. The increase was primarily the result of a $1.7 million increase for non - cash stock-based compensation expense due to increased headcount to support our growth and increasing fair values for new stock option awards, a $3.0 million increase in personnel and travel costs and a $1.4 million increase for facilities and overhead related costs primarily due to increased headcount and investment in manufacturing, a $1.8 million increase in manufacturing supplies, a $0.6 million increase in clinical trials cost as we continue to progress in these trials, a, $0.4 million increase in other expenses related to expanded research and development, and a $0.6 million increase in depreciation and amortization expense due to capitalization of equipment and leasehold improvements to support our manufacturing activities, offset by a decrease of $0.8 million in license and milestone payments.  Our AT342 and AT307 program expenses decreased by $0.5 million and $1.2 million, respectively for the three months ended September 30, 2018 as we shifted more spending to our AT982 program in preparation for planned clinical studies.  Our AT982 program expenses increased by $1.5 million, as we increased manufacturing of study materials and incurred additional consulting and initiation costs in preparation for planned clinical studies.  We anticipate that research and development expenses in aggregate will continue to increase as we continue to expand our operations and research and development activities.

General and Administrative

General and administrative expenses increased by $3.5 million, or 80%, to $7.8 million for the three months ended September 30, 2018. The increase was primarily the result of a $1.4 million increase in stock-based compensation expense due to increased headcount and increasing fair values for new stock option awards, a $0.6 million increase in personnel costs due to increased headcount, a $0.4 million increase in consulting expense to support our continued compliance efforts as a public company and a $1.0 million increase for facilities and overhead related costs.

Interest Income, net

Interest income, net increased by $1.3 million, or 583%, to $1.5 million for the three months ended September 30, 2018, as we invested a portion of the funds received from our public equity offerings into short duration fixed-income securities.

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Research and Development

Research and development expenses increased by $21.9 million, or 40%, to $76.2 million for the nine months ended September 30, 2018. The increase was primarily the result of a $4.6 million increase for non-cash stock-based compensation expense due to increased headcount to support our growth and increasing fair values for new stock option awards, a $9.9 million increase in personnel and travel costs and a $2.4 million increase for facility and overhead related costs primarily due to increased headcount and investment in manufacturing, a $2.5 million increase in manufacturing supplies, an $0.8 million increase in clinical trials cost as we continue to progress in these trials, and a $2.2 million increase in other expenses related to expanded research and development, offset by a decrease of $0.6 million in license and milestone payments.  Our AT132, AT307, and AT342 program expenses decreased by $3.4 million, $1.9 million, and $1.1 million, respectively, as we shifted some spending to our AT982 program. Our AT982 program expenses increased by $6.8 million, as we increased manufacturing of study materials and incurred additional consulting and initiation costs in preparation for planned clinical studies, while AT132 expenses decreased when compared to prior year’s expense due to substantial clinical trial initiation costs incurred in 2017.  During the nine months ended September 30, 2018, we revised our estimated probability and timing for triggering a milestone payment pursuant to the Cardiogen acquisition agreement that resulted in a $2.3 million decrease to the estimated fair value of the contingent liability and a related $2.3 million reduction of research and development expense. The change in estimate is attributable to our assessment of various factors related to the AT307 program, including an evaluation of ongoing patient identification efforts, and how those efforts may affect the development timeline and decisions regarding resource allocation among our various product development candidates. We anticipate that research and development expenses in aggregate will continue to increase as we expand our operations and research and development activities.

General and Administrative

General and administrative expenses increased by $8.6 million, or 71%, to $20.6 million for the nine months ended September 30, 2018. The increase was primarily the result of a $3.5 million increase in stock-based compensation expense due to increased headcount and increasing fair values for new stock option awards, a $2.3 million increase in personnel costs due to increased headcount, a $1.0 million increase in consulting expense to support our continued compliance efforts as a public company, and a $1.5 million increase for facilities and overhead related costs.

Interest Income, net

Interest income, net increased by $3.2 million, or 658%, to $3.7 million for the nine months ended September 30, 2018, as we invested a portion of the funds received from our public equity offerings into short duration fixed-income securities.

Liquidity, Capital Resources and Plan of Operations

Since our inception in 2012 through September 30, 2018, our operations have been financed solely by net proceeds of $135.8 million from the sale of shares of our convertible preferred stock and $426.7 million from the sale of common stock from our public equity offerings. As of September 30, 2018, we had $285.5 million in cash, cash equivalents, marketable securities and restricted cash, which includes restricted cash of approximately $3.6 million and long-term investments of approximately $1.3 million, and an accumulated deficit of $283.9 million.

On October 11, 2018, we completed an underwritten public offering of 5,980,000 shares of common stock (inclusive of 780,000 shares of common stock pursuant to the underwriters’ option to purchase additional shares) at a price of $29.00 per share. The aggregate net proceeds received by us were approximately $162.8 million, net of underwriting discounts, commissions and estimated offering costs.

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On March 29, 2018, we filed an automatic universal shelf registration statement. In connection with the filing of the registration statement, we entered into an “at-the-market” equity offering program and sales agreement, or ATM, with Cow en and Company, LLC., or Cowen, under which we may, from time to time, offer and sell common stock having an aggregate offering value of up to $150.0 million. During the nine months ended September 30, 2018, the Company sold 400,024 shares of common stock under the ATM for aggregate net proceeds of $14.6 million.

On January 29, 2018, we completed an underwritten public offering of 6,612,500 shares of common stock (inclusive of 862,500 shares pursuant to the underwriters’ option to purchase additional shares) at a price of $35.00 per share. The aggregate net proceeds received by us were $217.2 million, net of underwriting discounts, commissions and offering costs.

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. 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 that will be needed for our current and anticipated product development programs to achieve commercial success.

If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, 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 necessary 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 limiting 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 acceptable 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:

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Cash Flows from Operating Activities

Cash used in operating activities for the nine months ended September 30, 2018 was $79.5 million. Our net loss was $93.2 million, which was partially offset by noncash charges of $13.0 million, consisting primarily of $12.1 million of stock-based compensation expense and $3.9 million of depreciation and amortization expense, offset by $0.9 million related to the accretion of discounts on marketable securities and a $2.3 million reduction 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 prepaid expenses of $1.2 million, payment of a $3.2 million lease security deposit and a $0.7 million decrease in accounts payable offset by an increase of $4.6 million in accrued liabilities. These increases in prepaid expenses and accrued liabilities are based on timing of invoicing for services, primarily for research and development expenses.

Cash used in operating activities for the nine months ended September 30, 2017 was $61.3 million. Our net loss was $65.9 million, which was partially offset by noncash charges of $6.7 million consisting primarily of $4.1 million of stock-based compensation expense, $2.4 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 $0.9 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.

Cash Flows from Investing Activities

Cash used in investing activities was $90.1 million for the nine months ended September 30, 2018, primarily due to purchases of marketable securities of $210.0 million and purchases of property and equipment and leasehold improvements of $8.1 million, partially offset by the sale or maturity of marketable securities of $127.9 million.

Cash used in investing activities was $38.9 million for the nine months ended September 30, 2017, primarily due to purchases of marketable securities of $117.4 million and purchases of property and equipment and leasehold improvements of $5.0 million, partially offset by the sale or maturity of marketable securities of $83.5 million.

Cash Flows from Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2018 was related to net proceeds from our follow-on offering of $217.2 million and from our ATM program of $14.6 million, net of underwriting discounts, commissions and offering costs, and proceeds from the exercise of stock options of $3.2 million.

Cash provided by financing activities for the nine months ended September 30, 2017 included proceeds from the exercise of stock options of $0.6 million, $80.6 million in net proceeds from our follow-on offering and $36.4 million in net proceeds from the ATM, net of underwriting discounts, commissions and offering costs.

Off-Balance Sheet Arrangements

At September 30, 2018, 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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