News Column

GENOCEA BIOSCIENCES, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 6, 2014

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q. The following disclosure contains forward-looking statements that involve risk and uncertainties. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed in our Annual Report on Form 10-K.

Overview



We are a clinical stage biotechnology company that discovers and develops novel vaccines and immunotherapies to address diseases with significant unmet clinical needs. We use our proprietary discovery platform, ATLAS, to rapidly design first-in-class products that act through T cell (or cellular) immune responses, which are increasingly recognized as having potential value to treat or protect against many infectious diseases, cancer, and autoimmune disorders. In September 2013, we announced human proof of concept data for GEN-003, a candidate therapeutic vaccine, or immunotherapy, that we are developing to treat herpes simplex virus 2, or HSV-2, infections. These data from our Phase 1/2a trial represented the first reported instance of a therapeutic vaccine working against an infectious disease. We have now completed the follow-up review of patients for 12 months after their last dose of vaccine. Final analysis of the data showed that for the best performing 30g dose group, there was a sustained reduction in the viral shedding rate. After completion of dosing for this dose group, the viral shedding rate fell by 52% versus baseline and, at six months after the final dose, the shedding rate remained at 40% below baseline. At 12 months, the viral shedding rate returned to baseline for this dose group. The reduction in the genital lesion rate after completion of the third dose was greatest for the 30g dose group, at 48%. After six months, the reduction from baseline in genital lesion rate for this dose group was 65% and, after 12 months, the genital lesion rate was 42% lower than baseline. GEN-003 was safe and well tolerated over the 12 months of this trial. We believe the six-month duration of reduced viral shedding and genital lesion rates may be clinically meaningful. If GEN-003 successfully completes clinical development and is approved, we believe it would represent an important new treatment option for patients with HSV-2.

We are also developing a second T cell-stimulating vaccine candidate, GEN-004, a potential universal vaccine against pneumococcus, a leading cause of infectious disease mortality worldwide. In June 2014, we announced top line data from a Phase 1 clinical trial for GEN-004. This trial met its safety, tolerability and immunogenicity goals including measurable increases in the blood of T helper 17 (TH17) cells, a rare cell type that provides immunity at epithelial and mucosal surfaces. We plan to advance GEN-004 into a Phase 2 trial in the third quarter of 2014.

We commenced business operations in August 2006. To date, our operations have been limited to organizing and staffing our company, acquiring and developing our proprietary ATLAS technology, identifying potential product candidates and undertaking preclinical studies and clinical trials of our product candidates. All of our revenue to date has been grant revenue. We have not generated any product revenue and do not expect to do so for the foreseeable future. We have primarily financed our operations through the issuance of our equity securities, debt financings and amounts received through grants. As of June 30, 2014, we had received an aggregate of $158.0 million in gross proceeds from the issuance of equity securities and gross proceeds from debt facilities and an aggregate of $6.7 million from grants. At June 30, 2014, our cash and cash equivalents and marketable securities were $59.2 million.

Since inception, we have incurred significant operating losses. Our net losses were $7.1 million and $14.5 million for the three and six months ended June 30, 2014, and our accumulated deficit was $94.6 million as of June 30, 2014. We expect to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We will need to generate significant revenue to achieve profitability, and we may never do so.

On January 20, 2014, the board of directors and stockholders approved a 1-for-11.9 reverse stock split of the Company's Common Stock, which was effected on January 21, 2014. Stockholders entitled to fractional shares as a result of the reverse stock split received a cash payment in lieu of receiving fractional shares. The Company's historical share and per share information has been retroactively adjusted to give effect to this reverse stock split. Shares of Common Stock underlying outstanding stock options were proportionately reduced and the respective exercise prices proportionately increased. Shares of Common Stock reserved for future issuance were presented on an as converted basis and the financial statements disclose the adjusted conversion ratios.

We believe that our cash and cash equivalents at June 30, 2014 will enable us to fund our operating expenses and capital expenditure requirements through at least the end of 2015, by which time we expect to have completed our ongoing Phase 2 dose optimization clinical trial, commenced our Phase 2 dose regimen clinical trial for GEN-003 for HSV-2 and completed our planned Phase 2a clinical trial for GEN-004 for pneumococcus. However, costs related to clinical trials can be unpredictable and therefore there can be no guarantee that our current balances of cash, and cash equivalents marketable securities and any proceeds received from other sources will be sufficient to fund these studies or our operations through this period. These funds will not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for or commercially launch GEN-003, GEN-004 or any other product candidate. Accordingly, to obtain marketing approval for and to commercialize these or any other product candidates, we will be required to

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obtain further funding through public or private equity offerings, debt financings, collaboration and licensing arrangements or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital when needed would have a negative effect on our financial condition and our ability to pursue our business strategy.

Status of products in development as of June 30, 2014

GEN-003 for the treatment of HSV-2 infections

GEN-003 is in Phase 2 clinical development for the treatment of HSV-2. We initiated a Phase 2 dose-optimization clinical trial in July 2014, which will compare the best dose of GEN-003 from our Phase 1/2a trial to other combinations of protein and adjuvant to determine the optimal dose for future trials and potentially improve on the current profile of GEN-003. Top line data from this trial is expected in mid-2015.

GEN-004 for the prevention of pneumococcal infections

GEN-004 has completed is in Phase 1 clinical development. The Company plans to advance GEN-004 into a Phase 2a clinical trial in the third quarter of 2014 to demonstrate that GEN-004 can reduce colonization of pneumococcus in the nasopharynx in healthy adults. Topline data from this trial is expected in the mid-2015.

Products in research and pre-clinical development

We have ongoing pre-clinical development programs in chlamydia and HSV-2 prophylaxis and a research program in malaria. Additionally, we have an ongoing immuno-oncology collaboration with the Dana Farber Cancer Institute and Harvard Medical School.

Financial Overview Revenue



Grant revenue consists of revenue earned to conduct vaccine development research. We have received grants from a private not-for-profit organization and federal agencies. These grants have related to the discovery and development of several of our product candidates, including product candidates for the prevention of pneumococcus, chlamydia, and malaria. Revenue under these grants is recognized as research services are performed. Funds received in advance of research services being performed are recorded as deferred revenue. We plan to continue to pursue grant funding, but there can be no assurance we will be successful in obtaining such grants in the future.

We have no products approved for sale. We will not receive any revenue from any product candidates that we develop until we obtain regulatory approval and commercialize such products or until we potentially enter into agreements with third parties for the development and commercialization of product candidates. If our development efforts for any of our product candidates result in regulatory approval or we enter into collaboration agreements with third parties, we may generate revenue from product sales or from such third parties.

We expect that our revenue will be less than our expenses for the foreseeable future and that we will experience increasing losses as we continue our development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products. Our ability to generate revenue for each product candidate for which we receive regulatory approval will depend on numerous factors, including competition, commercial manufacturing capability and market acceptance of our products.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred to advance our preclinical and clinical candidates, which include:

personnel-related expenses, including salaries, benefits, stock-based compensation expense and travel;

expenses incurred under agreements with contract research organizations, or CROs, contract manufacturing organizations, or CMOs, consultants and other vendors that conduct our clinical trials and preclinical activities;

costs of acquiring, developing and manufacturing clinical trial materials and lab supplies; and

facility costs, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.

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We expense internal research and development costs to operations as incurred. We expense third party costs for research and development activities, such as conducting clinical trials, based on an evaluation of the progress to completion of specific performance or tasks such as patient enrollment, clinical site activations or information, which is provided to us by our vendors.

The following table identifies research and development expenses on a program-specific basis for our product candidates for the three and six months ended June 30, 2014 and 2013:

Three months ended June 30, Six months ended June 30, (in thousands) 2014 2013 2014 2013 HSV-2 (GEN-003)(1) $ 2,679 $ 1,545 $ 4,602$ 3,175 Pneumococcus (GEN-004)(1) 977 2,154 2,388 3,999 Other research and development (2) 895 399 1,968 905 Total research and development $ 4,551 $ 4,098 $ 8,958$ 8,079



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(1) Includes direct and indirect internal costs and external



costs such as CMO and CRO costs.

(2) Includes costs related to other product candidates and



technology platform development costs related to ATLAS.

We expect our research and development expenses will increase as we continue the manufacture of pre-clinical and clinical materials and manage the clinical trials of, and seek regulatory approval for, our product candidates.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel, including stock-based compensation and travel expenses, in executive and other administrative functions. Other general and administrative expenses include facility-related costs, communication expenses and professional fees associated with corporate and intellectual property legal expenses, consulting and accounting services.

We anticipate that our general and administrative expenses will increase in the future to support the continued research and development of our product candidates and to operate as a public company. These increases will likely include increased costs for insurance, costs related to the hiring of additional personnel and payments to outside consultants, lawyers and accountants, among other expenses. Additionally, if and when we believe a regulatory approval of our first product candidate appears likely, we anticipate that we will increase our salary and personnel costs and other expenses as a result of our preparation for commercial operations.

Interest Expense, Net



Interest expense, net consists primarily of interest expense on our long-term debt facilities and non-cash interest related to the amortization of debt discount and issuance costs, partially offset by interest earned on our cash and cash equivalents.

Other Expense



Other expense consists of fair value adjustments on warrants to purchase preferred stock. Upon completion of our IPO on February 10, 2014, warrants to purchase preferred stock were converted to warrants to purchase common stock and as a result, the Company no longer recorded fair value adjustment for its warrants.

Accretion of Preferred Stock



Certain classes of our preferred stock were redeemable beginning in 2017 at the original issuance price plus any declared or accrued but unpaid dividends upon written election of the preferred stockholders in accordance with the terms of our articles of incorporation. Accretion of preferred stock reflects the accretion of issuance costs and, for Series B preferred stock, cumulative dividends based on their respective redemption values. On February 10, 2014, we completed our IPO and all shares of preferred stock were converted into 11,435,593 shares of our Common Stock. No accretion of preferred stock is recorded after this date as no shares of preferred stock are outstanding.

Critical Accounting Policies and Significant Judgments and Estimates

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates-which also would have been reasonable-could have been used. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate estimates, which include, but are not limited to, estimates related to clinical trial accruals, stock-based compensation expense, warrants to purchase redeemable

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securities, and reported amounts of revenues and expenses during the reported period. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions.

The critical accounting policies we identified in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2013 related to accrued research and development expenses and stock-based compensation. There have been no material changes to our accounting policies from those described in our Annual Report on Form 10-K. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in our Annual Report on Form 10-K, as filed with the SEC on March 21, 2014.

Results of Operations



Comparison of the Three Months Ended June 30, 2014 and June 30, 2013

Three Months Ended June 30, Increase (in thousands) 2014 2013 (Decrease) Grant revenue $ - $ 228$ (228 ) Operating expenses: Research and development 4,551 4,098 453 General and administrative 2,358 879 1,479 Total operating expenses 6,909 4,977 1,932 Loss from operations (6,909 ) (4,749 ) (2,160 ) Other expense: Other expense - (100 ) 100 Interest expense, net (237 ) (108 ) (129 ) Other expense (237 ) (208 ) (29 ) Net loss $ (7,146 )$ (4,957 )$ (2,189 ) Grant Revenue



Grant revenue decreased $0.2 million to zero for the three months ended June 30, 2014 from $0.2 million for the three months ended June 30, 2013. The decrease was due to the completion of a grant to fund research for our pneumococcus program during 2013.

Research and Development Expenses

Research and development expense increased $0.5 million to $4.6 million for the three months ended June 30, 2014 from $4.1 million for the three months ended June 30, 2013. The increase was attributable to: an increase of $0.7 million in R&D personnel costs due to an increase in headcount, including $0.3 million in stock-based compensation; an increase of $0.7 million in GEN-003 external costs related to manufacturing and the recently initiated Phase 2 dose optimization trial; offset by a $0.9 million reduction in GEN-004 external costs, primarily related to lower manufacturing spend.

General and Administrative Expenses

General and administrative expense increased $1.5 million to $2.4 million for the three months ended June 30, 2014 from $0.9 million for the three months ended June 30, 2013. The increase due largely to additional personnel costs due to an increase in headcount of $0.5 million including $0.2 million in increased stock-based compensation; $0.5 million in increased audit, legal and consulting expenses and $0.5 million in public company overhead costs.

Other Expense



Other expense decreased $0.1 million to zero for the three months ended June 30, 2014 from $0.1 million for the three months ended June 30, 2013. The decrease was due to the conversion of warrants to purchase preferred stock into warrants to purchase common stock, which occurred in connection with the completion of our IPO on February 10, 2014, and as a result, a fair value calculation was not necessary for the three months ended June 30, 2014.

Interest Expense, Net



Interest expense, net increased $0.1 million to $0.2 million for the three months ended June 30, 2014 from $0.1 million for the three months ended June 30, 2013. The increase was due primarily to higher average principal balances for the second quarter of 2014 as compared to the same period in 2013.

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Comparison of the Six Months Ended June 30, 2014 and June 30, 2013

Six Months Ended June 30, Increase (in thousands) 2014 2013 (Decrease) Grant revenue $ - $ 488$ (488 ) Operating expenses: Research and development 8,958 8,079 879 General and administrative 4,324 1,690 2,634 Total operating expenses 13,282 9,769 3,513 Loss from operations (13,282 ) (9,281 ) (4,001 ) Other expense: Other expense (725 ) (106 ) (619 ) Interest expense, net (468 ) (234 ) (234 ) Other expense (1,193 ) (340 ) (853 ) Net loss $ (14,475 )$ (9,621 )$ (4,854 ) Grant Revenue



Grant revenue decreased $0.5 million to zero for the six months ended June 30, 2014 from $0.5 million for the six months ended June 30, 2013. The decrease was due to the completion of a grant to fund research for our pneumococcus program during 2013.

Research and Development Expenses

Research and development expense increased $0.9 million to $9.0 million for the six months ended June 30, 2014 from $8.1 million for the six months ended June 30, 2013. The increase was attributable to: an increase of $1.3 million in R&D personnel costs, including $0.7 million in stock-based compensation; an increase of $0.5 million in GEN-003 external costs, reflecting increased manufacturing costs offset by lower clinical trial costs; a decrease of $0.9 million in GEN-004 external costs reflecting lower manufacturing costs, partially offset by increased clinical trial costs.

General and Administrative Expenses

General and administrative expense increased $2.6 million to $4.3 million for the six months ended June 30, 2014 from $1.7 million for the six months ended June 30, 2013. The increase of $2.6 million was primarily due to additional personnel costs in 2014 of $1.1 million including $0.6 million in increased in stock-based compensation due to the vesting of certain performance-based common stock options; $0.6 million in increased audit, legal and consulting expenses, and $0.9 million in public company overhead costs.

Other Expense



Other expense increased $0.6 million to $0.7 million for the six months ended June 30, 2014 from $0.1 million for the six months ended June 30, 2013. The increase was due to an increase in the fair value of our warrants to purchase preferred stock as a result of an increase in the fair value of the underlying stock both before and on the date of the completion of our IPO on February 10, 2014.

Interest Expense, Net



Interest expense, net increased $0.3 million to $0.5 million for the six months ended June 30, 2014 from $0.2 million for the six months ended June 30, 2013. The increase was due primarily to higher average principal balances related to our term loan for the six months of 2014 as compared to the same period in 2013.

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Liquidity and Capital Resources

Overview



Since our inception through June 30, 2014, we have received an aggregate of $158.0 million in gross proceeds from the issuance of equity securities and gross proceeds from debt facilities and an aggregate of $6.7 million from grants. At June 30, 2014, our cash and cash equivalents and marketable securities were $59.2 million, comprising cash and cash equivalents of $32.1 million and marketable securities of $27.1 million. In February 2014, we completed an IPO of 5.5 million shares of our Common Stock at a price of $12.00 per share for an aggregate offering price of $66.0 million. We received net proceeds from the offering of approximately $61.4 million, after deducting approximately $4.6 million in underwriting discounts and commission, excluding offering costs payable by us.

Debt Financings



In October 2011, we entered into a Loan and Security Agreement, or the Term Loan, which provided for up to $5.0 million in debt financing. The Term Loan provided for a draw-down period on the loan through March 1, 2012. In March 2012, we drew down the full $5.0 million available through the facility.

From March 1, 2012 through May 1, 2012 we were obligated to make interest-only payments at the greater of (1) the lender's prime rate plus 5.0%, or (2) 8.0%. Thereafter, we were required to make 36 equal monthly payments of principal and accrued interest. During this 36-month period the Term Loan bore interest at the greater of (i) the lender's prime rate plus 4.75% or (ii) 8.0%. We were also obligated to pay 6.5% of the advance on the final repayment date, which was scheduled to be April 1, 2015. In connection with the Term Loan, we issued warrants to purchase 517,242 shares of Series B preferred stock at an exercise price of $0.58 per share. Upon execution of the Term Loan, the warrant to purchase 258,621 shares was immediately exercisable and the remaining warrant to purchase 258,621 shares became exercisable when we drew down the full amount of the loan on March 1, 2012. The $5.0 million term loan was collateralized by all of our corporate assets, excluding our intellectual property, and by a negative pledge on our intellectual property.

On September 30, 2013, we entered into a new loan agreement, or the New Term Loan, which provided up to $10.0 million in debt financing. Upon the closing, we drew down $3.5 million and paid off the outstanding principal and interest on the Term Loan. Under the terms of the New Term Loan, we could draw additional advances of up to the remaining $6.5 million through December 31, 2013. On December 19, 2013, we drew down the remaining $6.5 million on the New Term Loan. Each advance shall be repaid in 42 monthly installments. For the first nine months following each advance, we are obligated to make interest-only payments. Thereafter, we are required to make 33 equal monthly payments of principal together with interest. On the first business day of the 42nd month, we are also obligated to make a payment equal to 2.0% of the original principal amount of the advance. We may prepay the outstanding principal amount of the New Term Loan at any time. The New Term Loan was collateralized by a blanket lien on all our corporate assets, excluding our intellectual property, and by a negative pledge on our intellectual property. In connection with the New Term Loan, we issued a warrant to purchase 689,655 shares of Series C preferred stock at an exercise price of $0.58 per share. Upon execution of the New Term Loan, the warrant was immediately exercisable to purchase 689,655 shares. Upon completion of our IPO, the warrants became exercisable for an aggregate of 57,954 shares of our Common Stock at an exercise price of $6.90 per share. In April 2014, the 57,954 warrants were exercised in a cashless exercise for 37,250 shares of Common Stock.

Operating Capital Requirements

Our primary uses of capital are, and we expect will continue to be for the near future, compensation and related expenses, manufacturing costs for pre-clinical and clinical materials, third party clinical trial research and development services, laboratory and related supplies, clinical costs, legal and other regulatory expenses and general overhead costs.

We believe that our existing cash and cash equivalents at June 30, 2014 will be sufficient to fund our operations through at least the end of 2015, by which time we expect to have completed our ongoing Phase 2 dose optimization clinical trial and commenced our Phase 2 dose regimen clinical trial for GEN-003 for HSV-2 and completed our planned Phase 2a clinical trial for GEN-004 for pneumococcus. We expect that these funds will not be sufficient to enable us to seek marketing approval or commercialize any of our product candidates.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

the timing and costs of our ongoing Phase 2 dose optimization clinical trial and planned Phase 2 dose regimen trial for GEN-003 and our planned Phase 2a clinical trial for GEN-004;

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the progress, timing and costs of manufacturing GEN-003 and GEN-004 for current and planned clinical trials;

the initiation, progress, timing, costs and results of preclinical studies and clinical trials for our other product candidates and potential product candidates;

the outcome, timing and costs of seeking regulatory approvals;



the costs of commercialization activities for GEN-003, GEN-004 and other product candidates if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

the receipt of marketing approval, revenue received from commercial sales of our product candidates;

the terms and timing of any future collaborations, grants, licensing, consulting or other arrangements that we may establish;

the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone and royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements;

the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims; and

the extent to which we in-license or acquire other products and technologies.

We expect that we will need to obtain substantial additional funding in order to commercialize GEN-003, GEN-004 and our other product candidates in order to receive regulatory approval. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interests of our existing stockholders may be materially diluted and the terms of these securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders. In addition, debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely affect our ability to conduct our business. If we are unable to raise capital when needed or on attractive terms, we could be forced to significantly delay, scale back or discontinue the development or commercialization of GEN-003, GEN-004 or our other product candidates, seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, our rights to GEN-003, GEN-004 or our other product candidates that we otherwise would seek to develop or commercialize ourselves.

Cash Flows



The following table summarizes our sources and uses of cash for each of the periods below (in thousands):

Six Months Ended June 30, 2014 2013



Net cash used in operating activities $ (12,967 )$ (9,527 ) Net cash used in investing activities

(27,255 ) (342 ) Net cash provided by financing activities 60,142 14,418



Net increase in cash and cash equivalents $ 19,920$ 4,549

Operating Activities



The increase in net cash used in operations for the six months ended June 30, 2014, as compared to the six months ended June 30, 2013, was due primarily to an increase in the net loss of approximately $4.9 million along with changes in our working capital accounts.

Net cash used in operating activities was $13.0 million for the six months ended June 30, 2014 and consisted primarily of net loss of $14.5 million adjusted for non-cash items including depreciation expense of $0.2 million, stock-based compensation expense

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of $1.5 million, an increase in the fair value of warrants of $0.7 million and a net decrease in operating assets and liabilities of $0.9 million.

Net cash used in operating activities was $9.5 million for the six months ended June 30, 2013 and consisted primarily of a net loss of $9.6 million adjusted for non-cash items including depreciation expense of $0.2 million, stock-based compensation expense of $0.2 million and a net decrease in operating assets and liabilities of $0.3 million.

Investing Activities



Net cash used in investing activities for the six months ended June 30, 2014 and 2013 were $27.3 million and $0.3 million, respectively. Net cash used in investing activities for the six months ended June 30, 2014 consisted of $27.1 million used to purchase marketable securities and $0.2 million used to purchase property and equipment. Net cash in investing activities for the six months ended June 30, 2013 consisted of $0.3 million used to purchase property and equipment to facilitate our increased research and development activities and headcount.

Financing Activities



Net cash provided by financing activities for the six months ended June 30, 2014 and 2013 was $60.1 million and $14.4 million, respectively. Cash provided by financing activities for the six months ended June 30, 2014 primarily consisted of $60.0 million in net proceeds from our IPO and $0.2 million in proceeds from the exercise of stock options and warrants. Net cash provided by financing activities for the six months ended June 30, 2013 consisted primarily of $15.3 million in net proceeds from the issuance of preferred stock, which was partially offset by $0.8 million used for the repayment of long-term debt.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations



There have been no material changes to our contractual obligations from those described in our Annual Report on Form 10-K, as filed with the SEC on March 21, 2014, except as noted below:

In February 2014, the Company entered into a supply agreement with Fujifilm for the manufacture and supply of certain antigens of the Company for its GEN-003 Phase 2 dose optimization clinical trial. Under the agreement, the Company is obligated to pay Fujifilm manufacturing milestones, in addition to reimbursement of certain production related costs. Additionally, the Company is responsible for the payment of a reservation fee, which will equal a percentage of the expected production fees, to reserve manufacturing slots in the production timeframe. The Company has incurred $685 thousand and $710 thousand under this agreement for the three and six months ended June 30, 2014, respectively.


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