The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2017 on file with the SEC. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the ''Risk Factors'' section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.
We are a clinical-stage biopharmaceutical company developing new drugs to improve the lives of cancer patients by addressing key mechanisms of drug resistance that limit the rate and durability of response of many cancer therapies. Our targeted, small molecule drug candidates, designed using our proprietary kinase switch control inhibitor platform, inhibit the activation of kinases, an important family of enzymes, that, when mutated or over expressed, are known to be directly involved in the growth and spread of many cancers. We have built a diverse pipeline of wholly owned, orally administered drug candidates that include three clinical-stage and two research-stage programs.
Since our inception in 2003, we have focused substantially all of our efforts and financial resources on organizing and staffing our company, business planning, raising capital, developing product and technology rights, and conducting research and development activities for our drug candidates. We do not have any products approved for sale and have not generated any revenue from product sales.
On October 2, 2017, we completed an initial public offering, or IPO, of our common stock, pursuant to which we issued and sold 7,500,000 shares of common stock at a public offering price of $17.00 per share, resulting in net proceeds of $114.1 million after deducting underwriting discounts and commissions and other offering expenses. On October 4, 2017, we issued and sold an additional 666,496 shares of our common stock at the IPO price of $17.00 per share, pursuant to the underwriters' partial exercise of their option to purchase additional shares of common stock, resulting in additional net proceeds of $10.5 million after deducting discounts and commissions.
On June 11, 2018, we issued and sold 4,300,000 shares of our common stock in a follow-on public offering at a public offering price of $40.00 per share, resulting in net proceeds of $161.0 million after deducting underwriting discounts and commissions and other offering expenses. On June 20, 2018, we issued and sold an additional 645,000 shares of our common stock at the offering price of $40.00 per share, pursuant to the underwriters' full exercise of their option to purchase additional shares of common stock, resulting in additional net proceeds of $24.3 million after deducting underwriting discounts and commissions.
Prior to our IPO, we had funded our operations primarily with proceeds from the sales of preferred shares, proceeds from the issuance of convertible notes, payments received under a concluded collaboration agreement, borrowings under a construction loan and research and development grants from the Kansas Bioscience Authority, or KBA.
expand our operational, financial and management systems and increase personnel, including to support our clinical development and commercialization efforts and our operations as a public company.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our drug candidates. If we obtain regulatory approval for any of our drug candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Further, we expect to incur additional costs associated with operating as a public company.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our drug candidates.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of September 30, 2018, we had cash and cash equivalents of $320.9 million. We believe that our existing cash and cash equivalents will enable us to fund our operating expenses, capital expenditure requirements and debt service payments into the second half of 2020. See "Liquidity and Capital Resources."
In October 2018, the Company announced that it had initiated an open-label, multicenter, Phase 1b/2 trial of rebastinib in combination with paclitaxel to assess safety, tolerability, pharmacokinetics and efficacy in patients with advanced or metastatic solid tumors. In this two-part Phase 1b/2 clinical trial, rebastinib will be evaluated for the treatment of patients with advanced or metastatic solid tumors in combination with paclitaxel. Part 1 is designed to evaluate the safety, tolerability and pharmacokinetics of 50 mg and 100 mg rebastinib twice daily (BID) when administered in combination with paclitaxel, and to determine the recommended phase 2 dose (RP2D) of rebastinib in combination with paclitaxel, in patients with advanced or metastatic solid tumors that are refractory to standard therapies. In part 2, the safety, tolerability and efficacy of the RP2D of rebastinib in combination with weekly paclitaxel will be assessed across multiple cohorts, including: breast cancer, ovarian cancer, and endometrial cancer. This trial will enroll up to 36 evaluable patients in part 1 and up to 132 evaluable patients in part 2. In addition to the Phase 1b/2 clinical trial with paclitaxel, we intend to initiate a second Phase 1b/2 clinical trial of rebastinib in combination with carboplatin in the first quarter of 2019.
On October 2, 2017, immediately prior to the completion of our IPO, we engaged in a series of transactions whereby Deciphera Pharmaceuticals, LLC became a wholly owned subsidiary of Deciphera Pharmaceuticals, Inc., a Delaware corporation. As part of the transactions, shareholders of Deciphera Pharmaceuticals, LLC exchanged their shares of Deciphera Pharmaceuticals, LLC for shares of Deciphera Pharmaceuticals, Inc. on a one-for-5.65 basis and exchanged their outstanding equity incentive awards of Deciphera Pharmaceuticals, LLC for options to purchase the same number of shares of common stock of Deciphera Pharmaceuticals, Inc. multiplied by 5.65, with a corresponding adjustment to divide the exercise price by 5.65. We refer to these transactions as the Conversion.
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our drug candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. If we enter into license or collaboration agreements for any of our drug candidates or intellectual property, we may generate revenue in the future from payments as a result of such license or collaboration agreements. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our drug candidates. We may never succeed in obtaining regulatory approval for any of our drug candidates.
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies.
We expense research and development costs to operations as incurred. Advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.
Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to consultants, central laboratories, contractors, CMOs and CROs in connection with our preclinical and clinical development activities. We do not allocate employee costs, costs associated with our proprietary kinase switch control inhibitor platform technology or facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified.
maintaining a continued acceptable safety profile of the products following approval.
A change in the outcome of any of these variables with respect to the development of any of our drug candidates would significantly change the costs and timing associated with the development of that drug candidate. We may never succeed in obtaining regulatory approval for any of our drug candidates.
Research and development activities are central to our business model. Drug candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as our drug candidate development programs progress. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our drug candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.
Interest expense consists of interest expense associated with an outstanding construction loan from a related party. See "Liquidity and Capital Resources-Construction Loan."
Interest income consists of interest earned on our cash and cash equivalent balances. In the past our interest income has not been significant due to nominal cash and cash equivalent balances and low interest earned on those balances. We anticipate that our interest income will increase in the future due to higher cash and cash equivalent balances now existing as a result of our IPO in October 2017 and our follow-on public offering in June 2018. Other income, net, consists of insignificant amounts of miscellaneous income and expenses unrelated to our core operations.
Prior to the Conversion, we were treated as a partnership for tax purposes and had not been subject to U.S. federal or state income taxation and as a result, had not recorded any U.S. federal or state income tax benefits for the net losses we had incurred in each year or for our earned research and orphan drug credits. Upon the Conversion, we became subject to typical corporate U.S. federal and state income taxation; however, we do not have net operating loss carryforwards from periods prior to October 2, 2017 available to offset taxable income earned in future periods in which we will be treated as a corporation.
Since the Conversion in October 2017, we have not recorded any U.S. federal or state income tax benefits for either the net losses we have incurred or our earned research and orphan drug credits, due to the uncertainty of realizing a benefit from those items in the future. As of December 31, 2017, we had federal and state net operating loss carryforwards of $14.9 million and $15.2 million respectively. Our federal and state net operating loss carryforwards begin to expire in 2037 and 2027, respectively. We also had federal and state research and orphan drug credits of $3.8 million and less than $0.1 million, respectively, as of December 31, 2017, which begin to expire in 2037 and 2032, respectively.
Accordingly, we believe the policies set forth above are critical to fully understanding and evaluating our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.
Expenses related to our DCC-2618 program increased primarily as a result of increases in clinical trial costs of $4.4 million and manufacturing costs of $1.7 million. The increase in clinical trial costs was due to increased costs related to the pivotal Phase 3 trial in fourth-line and fourth-line plus GIST, which was initiated in January 2018. In addition, clinical trial costs increased due to start-up activities related to a second pivotal Phase 3 trial in second-line GIST which is expected to be initiated by the end of 2018. Chemistry, manufacturing and controls, or CMC, and manufacturing costs for the DCC-2618 program increased as a result of process development activities to support anticipated drug requirements for commercialization and the manufacture of registration lots to support the submission of a new drug application.
Expenses related to our rebastinib program increased primarily as a result of start-up activities related to our Phase 1b/2 trial of rebastinib in combination with paclitaxel which was initiated in October 2018.
The increase in personnel-related costs included in unallocated expenses was due to an increase in headcount in our research and development function. Personnel-related costs for the three months ended September 30, 2018 and 2017 included stock-based compensation expense of $1.1 million and $0.5 million, respectively. The increase in stock-based compensation expense was primarily related to additional employee stock options and a higher value of our common stock. The increase in facility-related and other costs included in unallocated expenses was primarily due to an increase in recruitment costs and costs incurred in connection with our early-stage drug discovery programs.
The increase in personnel-related costs was primarily a result of an increase in stock-based compensation expense. Personnel-related costs for the three months ended September 30, 2018 and 2017 included stock-based compensation expense of $1.5 million and $0.6 million, respectively. The increase in stock-based compensation expense was primarily related to additional employee stock options and a higher value of our common stock. The increase in professional and consultant fees was primarily due to an increase in various advisory fees, including those related to legal and accounting associated with operating as a public company. The increase in facility-related and other costs was primarily due to director and officer insurance costs and higher rent expense related to our new lease.
The increase in interest and other income, net, was primarily due to an increase in interest income resulting from net proceeds from our IPO in October 2017 and follow-on public offering in June 2018.
Comparison of the Nine Months Ended September 30, 2018 and 2017 The following table summarizes our results of operations for the nine months ended September 30, 2018 and 2017: Nine Months Ended . . .