What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-14 · 182 added, 98 removed, 191 unchanged (59% of the section changed)

17 unchanged sentences

Individuals with this polymorphism have reduced PGRN levels and are at an increased risk for AD.

In the second half of 2024, we expect to obtain regulatory feedback on the clinical pathway to treating FTD- C9orf72 and ALS patients with PBFT02.

We have a research collaboration with the Trustees of the University of Pennsylvania’s, or Penn’s, Gene Therapy Program, or GTP, headed by Dr.

James Wilson, a leader in the genetic medicines field.

Our research collaboration with GTP provides us with access to one of the premier research institutions in the world for the discovery and preclinical development of genetic medicine product candidates.

We are purposefully focusing on neurodegenerative diseases for which we believe our genetic medicine approach provides distinct technical advantages based on decades of research by GTP.

GTP at Penn conducts rigorous discovery and preclinical studies to identify promising product candidates.

Under our research collaboration, we have exclusive development and global commercial rights to product candidates for certain rare monogenic and certain non-rare, non-monogenic, or large, CNS disorders, subject to certain limitations.

We also have access to platform technologies related to development of novel capsids, toxicity reduction technologies, and optimization approaches for delivery and formulation for product candidates in the CNS indications that we select.

We have progressed four product candidates sourced from our research collaboration with GTP to the clinical stage of development and have eight remaining options to license additional programs from GTP until August 2026.

Through our collaboration with GTP, we have one active preclinical program in Huntington’s disease.

As announced in December 2023, we are pursuing potential out-licensing opportunities for clinical-stage pediatric programs in GM1 gangliosidosis, or GM1, Krabbe disease, and metachromatic leukodystrophy, or MLD.

We received positive regulatory feedback on the clinical pathway to treating FTD- C9orf72 patients with PBFT02 and plan to initiate dosing in the first half of 2025.

We expect to obtain regulatory feedback on the clinical pathway to treating ALS patients with PBFT02 in the second half of 2024.

Research Developments

On July 31, 2024, we entered into a series of sublicense agreements with Gemma Biotherapeutics, Inc., or Gemma, a newly formed genetic medicines company co-founded by Dr.

James Wilson, in connection with the outlicense of PBGM01 for the treatment of GM1 gangliosidosis, or GM1, PBKR03 for the treatment of Krabbe disease, and PBML04 for the treatment of metachromatic leukodystrophy, or MLD, collectively the Outlicensed Programs and such agreements, the Gemma Sublicenses.

Pursuant to the Gemma Sublicenses, we will receive (i) initial payments of $10 million for the purchase of clinical product supply;

(ii) up to an additional $10 million contingent on the completion by Gemma of certain business milestones;

(iii) up to an additional $114 million in development and commercial milestone payments;

and (iv) single digit royalties as a percentage of annual worldwide net sales in exchange for sublicenses to relevant intellectual property, transfer of regulatory dossiers and transfer of clinical trial materials and product supply related to the Outlicensed Programs.

Pursuant to the Gemma Sublicenses, Gemma will also be responsible for all payments due to Penn under the Penn Agreement related to the Outlicensed Programs.

We also entered into a transition services agreement with Gemma, or the Transition Services Agreement, pursuant to which, we will provide transitional

services at cost to Gemma for a period of up to six months from the effective date, and be entitled to reimbursement for transitional services performed retroactively from March 1, 2024, related to the transfer of the Outlicensed Programs.

We also entered into a research, collaboration and license agreement with Gemma, or the Gemma Collaboration Agreement, pursuant to which (i) Gemma will conduct certain preclinical and IND-enabling work for our active research program in Huntington’s disease and a currently paused research program in Temporal Lobe Epilepsy, or TLE, which were previously being conducted by Penn under the Penn Agreement and (ii) Gemma will grant us options to conduct new research programs in four new CNS indications.

We refer to the Gemma Sublicenses, the Transition Services Agreement, and the Gemma Collaboration Agreement, collectively, as the Outlicense Transaction Agreements.

As a result of the Outlicense Transaction Agreements, we and Penn also amended and restated the Penn Agreement, as of July 31, 2024 to (i) terminate our funding of discovery research;

(ii) terminate the research and exploratory research programs being conducted by Penn;

(iii) terminate the remaining options we had to select new research programs in the CNS field;

and (iv) terminate the transaction fee due to Penn as a result of certain corporate transactions.

Prior to the execution of the Outlicense Transaction Agreements, we had a research collaboration with the Trustees of the University of Pennsylvania’s, or Penn’s, Gene Therapy Program, or GTP, headed by Dr.

Under this collaboration, we progressed four product candidates sourced from our research collaboration with GTP to the clinical stage of development and had one active preclinical program in Huntington’s disease.

We have a gene therapy pipeline with the potential to address multiple neurodegenerative diseases.

Our development programs consist of:

*8 additional CNS pipeline license options remain;

3 license options were previously exercised, and rights were subsequently returned to the University of Pennsylvania.

† US/EU prevalence per third-party sources

11 unchanged sentences

We are conducting our upliFT-D trial, an international, multi-center, open-label, single-arm Phase 1/2 clinical trial of PBFT02 in patients with a diagnosis of symptomatic FTD- GRN .

We reported initial safety and biomarker data from three patients in Cohort 1 of our upliFT-D trial in December of 2023 and May 2024.

In this trial, Dose 1 of PBFT02 treatment was generally well-tolerated in study participants who received an enhanced immunosuppression regimen.

We reported biomarker data from three patients in Cohort 1 of our upliFT-D trial in December of 2023 and May 2024.

Dose 1 of PBFT02 resulted in consistent elevated levels of CSF PGRN with concentrations ranging from 10.7 to 17.3 ng/mL at 30 days post-treatment (n=3) and 21.7 to 27.3 ng/mL at 6 months post-treatment (n=2), higher than the range found in healthy adult controls of 3.3 to 8.2 ng/mL (mean=4.8 ng/mL;

In contrast, following PBFT02 treatment, plasma PGRN levels were unaltered, remaining similar to baseline concentrations and below levels found in healthy adult controls throughout the available follow-up period across all three patients.

We have completed dosing of Cohort 1 (n=5) and expect to initiate dosing of Cohort 2 (n=3-5) in the second quarter of 2024.

Based on the robust PGRN expression observed in the initial patients in Cohort 1, including from the first two patients to reach six months post PBFT02 administration, we plan to continue studying Dose 1 in Cohort 2 of the upliFT-D trial, pending review of the safety data from the Cohort 1 study population with the Independent Data Monitoring Committee or IDMC.

We expect to report six-month safety and biomarker data from Cohort 1 FTD- GRN patients of the upliFT-D trial in the second half of 2024, and report 12-month follow-up data from Cohort 1 patients and initial safety and biomarker data from Cohort 2 patients in the first half of 2025.

The FDA has granted Orphan Drug Designation and Fast Track Designation to PBFT02 for the treatment of FTD- GRN and the European Commission has granted Orphan designation for PBFT02.

In contrast, following PBFT02 treatment, plasma PGRN levels were unaltered, remaining similar to baseline concentrations and below levels found in healthy adult controls.

As of June 2024, Dose 1 of PBFT02 treatment was generally well-tolerated in study participants who received an enhanced immunosuppression regimen (n=4).

We have completed dosing of Cohort 1 (n=5) and have enrolled the first patient in Cohort 2 (n=3-5).

Based on the robust PGRN expression observed in the initial patients in Cohort 1, we are continuing to study Dose 1 in Cohort 2 of the upliFT-D trial.

We expect to deliver on the following related to our upliFT-D trial for PBFT02 for the treatment of FTD- GRN :

● report updated safety and biomarker data from Cohort 1 patients in September 2024;

● report 12-month follow-up data from Cohort 1 patients and interim data from Cohort 2 patients in the first half of 2025;

● seek regulatory feedback on pivotal trial design in the second half of 2025.

The FDA has granted Orphan Drug Designation for PBFT02 for the treatment of FTD and Fast Track Designation for PBFT02 for the treatment of FTD- GRN .

The European Commission has granted Orphan designation for PBFT02 for the treatment of FTD.

PBFT02 for the treatment of FTD-C9orf72 and ALS

6 unchanged sentences

We anticipate that elevating neuronal PGRN levels in diseases with TDP-43 pathology may provide significant benefits to patients.

We expect to obtain regulatory feedback on the clinical pathway to treating FTD- C9orf72 and ALS patients with PBFT02 in the second half of 2024.

We have initiated preclinical studies to extend these initial observations.

We received positive regulatory feedback on the clinical pathway to treating FTD- C9orf72 with PBFT02 in the ongoing upliFT-D trial and expect to initiate dosing in the first half of 2025.

We expect to obtain regulatory feedback on the clinical pathway to treating ALS patients with PBFT02 in the second half of 2024.

PBFT02 for the treatment of AD

We believe that elevating PGRN levels has the potential to improve the course of AD in patients who carry the GRN rs5848 single nucleotide polymorphism, or GRN SNP.

The GRN SNP is associated with reduced PGRN levels and is present within approximately 30% of the population.

The GRN SNP has an allele frequency of approximately 30% and is associated with reduced PGRN levels.

Its presence has been shown to confer an increased risk for AD onset.

1 unchanged sentence

Third party preclinical studies in animal models have demonstrated that low levels of PGRN may exacerbate AD pathology and, conversely, high levels of PGRN may reduce AD pathology.

We plan to initiate preclinical studies in AD to extend these initial observations.

We have initiated preclinical studies in AD to extend these initial observations.

Other Clinical Product Candidates

We have three additional clinical product candidates, PBGM01, PBKR03 and PBML04.

In order to reduce operating expenses, we have stopped further clinical development and are pursuing out-licensing opportunities for these product candidates.

As of July 31, 2024, we outlicensed our clinical stage pediatric programs in GM1 (PBGM01), Krabbe disease (PBKR03), and MLD (PBML04) as part of the Outlicense Transaction Agreements.

Active Research Programs

We have one unnamed preclinical research program through our license agreement with GTP, which is exploring multiple potential treatment targets for Huntington’s disease.

Beyond this program, through our research collaboration with GTP, we also have the option to license programs for eight additional new indications in CNS diseases along with certain rights and licenses to new gene therapy technologies developed by GTP, such as novel capsids, toxicity reduction technologies, and approaches to optimize delivery and formulation.

We have one unnamed preclinical research program through the Gemma Collaboration Agreement which was previously conducted by Penn under the Penn Agreement and is exploring multiple potential treatment targets for Huntington’s disease.

Beyond this program, as a result of the Gemma Collaboration Agreement, we also have the option to license programs for four additional new indications in CNS diseases from Gemma.

Paused Research Programs

We have a preclinical research program, PBAL05, under our license agreement with Penn for patients with ALS who have a gain-of-function mutation in the C9orf72 gene.

We also have a program under our exploratory research program with GTP for Temporal Lobe Epilepsy.

In order to reduce operating expenses, we have paused development of both of these programs.

We also have a research program through the Gemma Collaboration Agreement for TLE, which was previously conducted by Penn under the Penn Agreement.

In order to reduce operating expenses, we have paused development of this program.

We have terminated our research program in ALS due to C9orf72 mutations.

Business Overview

3 unchanged sentences

Historically, we have funded our operations through the sale of convertible preferred stock and public offerings of common stock.

Our net losses were $16.7 million and $34.3 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had an accumulated deficit of $611.2 million.

Our net losses were $16.0 million and $23.9 million for the three months ended June 30, 2024 and 2023, respectively, and $32.7 million and $58.2 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had an accumulated deficit of $627.2 million.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures.

1 unchanged sentence

We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through all stages of development and clinical trials and, ultimately, seek regulatory approval.

In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.

In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product

manufacturing, marketing, sales and distribution.

Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

4 unchanged sentences

If we are unable to secure adequate additional funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $104.5 million.

We expect our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2025.

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $91.8 million.

We expect our existing cash, cash equivalents and marketable securities, combined with the initial payments to be received from the Outlicense Transaction Agreements, will enable us to fund our operating expenses and capital expenditure requirements to the end of the second quarter of 2026.

Financial Operations Overview

1 unchanged sentence

University of Pennsylvania

We have a research, collaboration and licensing agreement with Penn, as amended, or the Penn Agreement, for research and development collaborations and exclusive license rights to patents for certain products and technologies.

Under the Penn Agreement, we have the option to obtain exclusive licenses to, and to fund, certain research relating to the preclinical development of selected products in research programs in rare monogenic CNS indications.

We have eight remaining options available to commence additional licensed programs for CNS indications until August 3, 2026.

The Penn Agreement includes an exploratory research program to identify targets and early product candidates in certain agreed upon non-monogenic, non-rare, or large, CNS indications.

The initial term of the exploratory research program is three years, or until August 2024, which term can be extended by mutual agreement.

During such term, we will have an exclusive right of first negotiation to include additional targets to the exploratory research program in the agreed upon large CNS indications.

Under the exploratory research program, we will have the right to further develop and commercialize any gene therapy product candidates specific for those selected targets that arise from the exploratory research programs by exercising one of our remaining eight options.

We currently do not have any active exploratory research programs.

If we were to exercise any of the remaining options, we would owe Penn a non-refundable aggregate fee of $1.0 million per product indication, with $0.5 million due upfront and another $0.5 million fee owed upon a further developmental milestone.

We also fund discovery research conducted by Penn through August 3, 2026 and will receive exclusive rights, subject to certain limitations, to platform technologies resulting from the discovery research for our products developed with GTP, such as novel capsids, toxicity reduction technologies and delivery and formulation improvements.

This funding commitment for the discovery research is $5.0 million annually, paid in quarterly increments of $1.3 million through June 2026.

The Penn Agreement requires that we make payments of up to (i) $16.5 million per product candidate for rare, monogenic disorders in the aggregate and (ii) $39.0 million per product candidate in the aggregate arising from the exploratory program for large CNS indications.

As a result of the Outlicense Transaction Agreements, we restructured our research, collaboration and licensing agreement with Penn, as amended, previously the Penn Agreement and now referred to as the Penn License Agreement.

Pursuant to the Penn License Agreement, as of July 31, 2024, we (i) terminated the funding of discovery research programs;

(ii) terminated the research and exploratory research programs;

(iii) terminated the remaining eight options we had for future CNS indications;

(iv) terminated the transaction fee payable to Penn in the event of certain corporate transactions;

and (v) retained our current exclusive and non-exclusive licenses to our programs in FTD, GM1, Krabbe and MLD and certain platform technologies resulting from the discovery programs that we funded.

For our licensed programs in FTD, GM1, Krabbe and MLD, the Penn License Agreement requires that we make payments of up to $16.5 million per product candidate.

Each payment will be due upon the achievement of specific development milestone events by such licensed product for a first indication, reduced development milestone payments for the second and third indications and no development milestone payments for subsequent indications.

In addition, on a product-by-product basis, we are obligated to make up to $55.0 million in sales milestone payments on each licensed product based on annual sales of the licensed product in excess of defined thresholds.

In addition, on a product-by-product basis, we are obligated to make up to $55.0 million in sales milestone payments on each licensed product based on annual worldwide net sales of the licensed product in excess of defined thresholds.

Pursuant to the Gemma Sublicenses, Gemma is responsible for the payments to Penn related to the Outlicensed Programs.

Upon successful commercialization of a product using the licensed technology, we are obligated to pay to Penn, on a licensed product-by-licensed product and country-by-country basis, tiered royalties (subject to customary reductions) in the mid-single digits on annual worldwide net sales of such licensed product.

In addition, we are obligated to pay to Penn a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses under the Penn Agreement.

In addition, other than the Gemma Sublicenses, we are obligated to pay to Penn a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses under the Penn License Agreement.

The agreement will expire on a licensed product-by-licensed product and country-by-country basis upon the later of (i) the expiration of the last valid claim of the licensed patent rights that covers the exploitation of such licensed product in such country, and (ii) the expiration of the royalty period.

In addition, we will pay a tiered transaction fee of 1-2% of the net proceeds upon certain change of control events.

Pursuant to the Gemma Sublicenses, Gemma is responsible for the payments to Penn related to the Outlicensed Programs.

Gemma Biotherapeutics, Inc.

- Research, Collaboration and License Agreement

In connection with the transfer of the Outlicensed Programs, on July 31, 2024, we entered into the Gemma Collaboration Agreement.

Pursuant to the Gemma Collaboration Agreement, (i) Gemma will conduct certain preclinical and IND-enabling work for our active research program in Huntington’s disease and a currently paused research program in TLE, which were previously being conducted by Penn under the Penn Agreement and (ii) Gemma will grant us options to conduct mutually agreed research programs in four new CNS indications.

The Gemma Collaboration Agreement requires that we make payments of up to (i) $16.5 million per product candidate in the aggregate for Huntington’s disease and any future CNS indications available to us under our four options and (ii) $39.0 million per product candidate in the aggregate arising from the research program for TLE.

Upon successful commercialization of a product using the licensed technology, we are obligated to pay to Gemma, on a licensed product-by-licensed product and country-by-country basis, tiered royalties (subject to customary reductions) in the mid-single digits percentage on annual worldwide net sales of such licensed product.

In addition, we are obligated to pay to Gemma a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses under the Gemma Collaboration Agreement.

If we were to exercise any of the four options, we would owe Gemma a non-refundable aggregate fee of $1.0 million per product indication, with $0.5 million due upfront and another $0.5 million fee owed upon a further developmental milestone.

Gemma Biotherapeutics, Inc.

- Sub-License Agreements and Transition Services Agreement

In connection with the transfer of the Outlicensed Programs to Gemma, we have entered into the Gemma Sublicenses, pursuant to which, we will receive (i) initial payments of $10 million for the purchase of clinical product supply;

(ii) up to an additional $10 million contingent on the completion by Gemma of certain business milestones;

(iii) up to an additional $114 million in development and commercial milestone payments;

In addition, Gemma is responsible for all payments to Penn related to the Outlicensed Programs under the Penn License Agreement.

In addition, we entered into a transition services agreement with Gemma pursuant to which (i) we will provide transitional services at cost to Gemma for a period of up to six (6) months related to the transfer of the Outlicensed Programs and (ii) Gemma will reimburse us for certain costs related to conduct of the Outlicensed Programs incurred since March 1, 2024.

Collaboration and Manufacturing and Supply Agreements

In June 2019, we entered into a collaboration agreement, or the Collaboration Agreement, with Catalent Maryland, a unit of Catalent, Inc., or Catalent.

As part of the Collaboration Agreement, we were required to pay an annual fee for five

years ending in 2025 for the exclusive use of a dedicated clean room suite, or the Clean Room Suite.

In April 2020, we entered into a development services and clinical supply agreement, or the Manufacturing and Supply Agreement, with Catalent to secure clinical scale manufacturing capacity for batches of active pharmaceutical ingredients for our gene therapy product candidates.

As part of the Collaboration Agreement, we were required to pay an annual fee for five years ending in 2025 for the exclusive use of a dedicated clean room suite, or the Clean Room Suite.

therapy product candidates.

Under the terms of the Manufacturing and Supply Agreement, Catalent agreed to manufacture batches of drug product for our gene therapy product candidates at the Clean Room Suite at a Catalent facility provided for in the Collaboration Agreement.

6 unchanged sentences

In consideration of this, we had an obligation to make aggregate payments to Catalent of $6.0 million between June 30, 2023 and May 1, 2024.

As of June 30, 2024, we have made all payments related to this obligation under the Amended Catalent Agreements.

The Amended Catalent Agreements extend the term of the Original Catalent Agreements until November 6, 2030, and establish a limited exclusive relationship between us and Catalent for the manufacture of bulk drug substance and drug product for our adeno-associated virus delivery therapeutic product candidates for the treatment of FTD and GM1.

1 unchanged sentence

In addition, in the event of certain transactions, we may terminate the Amended Catalent Agreements for convenience with respect to such products, in which case, we would pay to Catalent a certain termination fee.

The outlicense of GM1 to Gemma under the Outlicense Transaction Agreements, and subsequent business decisions implemented by Gemma under their sole discretion, could qualify as a divesture event under the Amended Catalent Agreements and require us to make payment of certain fees to Catalent, which fees are immaterial.

Immediately prior to the execution of the Letter Agreements, we had a $5.3 million prepaid asset related to upfront payments made to secure the Clean Room Suite.

In connection with the Letter Agreements, we no longer have exclusive access to the Clean Room Suite at Catalent and, as a result, we recognized an expense of $5.3 million related to the elimination of the prepaid asset during the three months ended March 31, 2023.

We classified the $11.3 million of expenses, which comprises of $6.0 million in aggregate payments due to Catalent and the $5.3 million elimination of the prepaid asset, as general and administrative expense within the statement of operations for the three months ended March 31, 2023, as both amounts did not directly relate to the future advancement of our research and development programs.

As of March 31, 2024, we made payments of $4.0 million under the Amended Catalent Agreements.

The remaining $2.0 million of aggregate payments due to Catalent under the Amended Catalent Agreements are included in accrued expenses and other current liabilities as of March 31, 2024, and were paid in May 2024.

We classified the $11.3 million of expenses, which comprises of $6.0 million in aggregate payments due to Catalent and the $5.3 million elimination of the prepaid asset, as general and administrative expense within the statement of operations for the six months ended June 30, 2023, as both amounts did not directly relate to the future advancement of our research and development programs.

Components of Results of Operations

7 unchanged sentences

● expenses incurred at and for our lab facilities, including rent, utilities, depreciation, and maintenance.

We track outsourced development expenses and other external research and development expenses to specific product candidates on a program-by-program basis, such as expenses incurred under our collaboration with Penn, fees paid to CROs, CDMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities.

However, we do not track our internal research and development expenses on a program-by-program basis as they primarily relate to compensation and other expenses which are deployed across multiple projects under development.

We track outsourced development expenses and other external research and development expenses to specific product candidates on a program-by-program basis, such as fees paid to CROs, CDMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities, expenses incurred under our prior collaboration with Penn, and future expenses incurred under the Gemma Collaboration Agreement.

However, we do not track our internal research and development expenses on a program-by-program basis as they primarily relate to compensation, lab operations and lab facility costs, and other expenses which are deployed across multiple projects under development.

Research and development activities are central to our business model.

1 unchanged sentence

We expect our research and development expenses to remain consistent in the near future.

We expect that the reduction of expenses related to the Outlicensed Programs pursuant to the Outlicense Transaction Agreements will offset the increased expenses of advancing our remaining product candidates in the near future.

If our product candidate portfolio progresses into later-stage clinical trials, we expect that our research and development expenses will increase in the future to support our continued research and development activities and production of clinical supply.

1 unchanged sentence

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and share-based compensation expense, for employees and consultants in executive, finance, accounting, legal, information technology, product strategy, quality, regulatory, operations and human resource functions.

General and administrative expenses also include corporate facility costs, including rent, utilities, depreciation and maintenance, legal expenses related to intellectual property, litigation and corporate matters, insurance expense, expenses related to contract modifications or terminations, software expenses, expenses incurred to engage with patient advocacy organizations, recruitment related expenses, and expenses for other professional and consulting services.

General and administrative expenses also include headquarters facility costs, including rent, utilities, depreciation and maintenance, legal expenses related to intellectual property, litigation and corporate matters, insurance expense, expenses related to contract modifications or terminations, software expenses, expenses incurred to engage with patient advocacy organizations, recruitment related expenses, and expenses for other professional and consulting services.

We expect our general and administrative expenses to remain consistent in the near future.

2 unchanged sentences

If any of our current or future product candidates obtain regulatory approval, we expect that we would incur significantly increased expenses associated with building a commercial sales and marketing team.

Impairment of Long-Lived Assets

Impairment of long-lived assets consists of non-cash impairment charges recorded to our assets.

We review long-lived assets, such as the right of use assets or property and equipment, for impairments when events or changes in circumstances indicate the carrying amount of the assets may not be recoverable.

During the six months ended June 30, 2024, we recognized impairment expense related to property and equipment for a construction in progress asset.

Other Income (Expense), Net

Other income (expense), net consists of interest earned on our cash equivalents and marketable securities, and amortization of premium and discount on our marketable securities.

Additionally, in the three months ended March 31, 2023, we recognized other income related to the sale of certain tax credits.

Other income (expense), net consists of interest earned on our cash equivalents and marketable securities, amortization of premium and discount on our marketable securities, and income from subleases.

Additionally, in the six months ended June 30, 2023, we recognized other income related to the sale of certain tax credits.

Results of Operations

Comparison of the three months ended March 31, 2024 and 2023

The following table sets forth our results of operations for the three months ended March 31, 2024 and 2023:

Comparison of the three months ended June 30, 2024 and 2023

The following table sets forth our results of operations for the three months ended June 30, 2024 and 2023:

Three months ended

3 unchanged sentences

General and administrative

Impairment of long-lived assets

Loss from operations

1 unchanged sentence

Research and Development Expenses

Research and development expenses decreased by $5.3 million to $11.5 million for the three months ended March 31, 2024 from $16.8 million for the three months ended March 31, 2023.

Research and development expenses decreased by $6.9 million to $10.4 million for the three months ended June 30, 2024 from $17.3 million for the three months ended June 30, 2023.

The decrease was primarily due to the following:

● a decrease of $1.3 million in clinical operations expenses driven by lower activity in supporting the GM1 and Krabbe programs, for which we are pursuing out-licensing opportunities;

● a decrease of $1.7 million in Penn expenses related to the pausing of certain programs in our preclinical portfolio and reduction of post-IND support for our clinical stage programs;

● a decrease of $1.4 million in wages and benefits related to reductions in headcount;

● a decrease of $1.1 million in Penn expenses.

Expenses associated with the Penn Agreement will continue to vary from year to year based on our selection and prioritization of preclinical product candidates, the status of our preclinical pipeline and timing of preclinical work performed;

● a decrease of $0.8 million in chemistry, manufacturing and control expenses primarily related to lower external manufacturing expenses, most significantly related to (i) reduced external manufacturing activities for our GM1 program and (ii) reduced expenses for Clean Room Suite fees related to the Amended Catalent Agreements;

● a decrease of $1.2 million in clinical operations expenses driven by lower activity in supporting the GM1 and Krabbe programs, partially offset by increased activity for FTD;

● a decrease of $1.0 million in share-based compensation expense related to reductions in headcount;

● a decrease of $0.9 million in chemistry, manufacturing and control expenses primarily related to lower external manufacturing expenses, most significantly related to reduced external manufacturing activities for our GM1 program;

● a decrease of $0.6 million in facility and other expenses;

● a decrease of $0.3 million in professional fees.

These decreases were partially offset by:

● an increase of $0.3 million in facility and other expenses.

● an increase of $0.2 million for pre-clinical studies to evaluate the efficacy of PBFT02 in models of neurodegenerative disorders.

General and Administrative Expenses

General and administrative expenses decreased by $12.5 million to $6.5 million for the three months ended March 31, 2024 from $19.0 million for the three months ended March 31, 2023.

General and administrative expenses decreased by $1.6 million to $6.5 million for the three months ended June 30, 2024 from $8.1 million for the three months ended June 30, 2023.

The decrease was primarily due to the following:

● a decrease of $11.3 million related to expenses incurred in conjunction with the Amended Catalent Agreements during the three months ended March 31, 2023;

● a decrease of $0.7 million in wages and benefits related to reductions in headcount;

● a decrease of $1.2 million in share-based compensation expense related to reductions in headcount;

● a decrease of $0.9 million in wages and benefits related to reductions in headcount;

● a decrease of $0.3 million in facility and other expenses.

These decreases were partially offset by:

● an increase of $0.8 million in professional services and consulting.

Impairment of Long-Lived Assets

During the three months ended June 30, 2024, we recorded $0.4 million of impairment expenses related to property and equipment for a construction in progress asset we no longer plan to deploy.

During the three months ended June 30, 2023, we did not record any impairment expense.

Other Income (Expense), Net

Other income (expense), net decreased by $0.2 million to $1.3 million for the three months ended March 31, 2024 from $1.5 million for the three months ended March 31, 2023.

Other income (expense), net decreased by $0.1 million to $1.4 million for the three months ended June 30, 2024 from $1.5 million for the three months ended June 30, 2023.

The decrease was primarily due to the following:

● a decrease of $0.4 million attributable to the sale of certain tax credits during the three months ended March 31, 2023.

● a decrease of $0.3 million attributable to interest income and the amortization of premium and discount on our marketable securities.

The decrease was partially offset by:

● an increase of $0.2 million attributable to interest income and the amortization of premium and discount on the Company’s marketable securities.

● an increase of $0.2 million attributable to income from subleases.

Comparison of the six months ended June 30, 2024 and 2023

The following table sets forth our results of operations for the six months ended June 30, 2024 and 2023:

Six months ended

(in thousands)

Operating expenses:

Research and development

General and administrative

Impairment of long-lived assets

Loss from operations

Other income (expense), net

Research and Development Expenses

Research and development expenses decreased by $12.2 million to $22.0 million for the six months ended June 30, 2024 from $34.2 million for the six months ended June 30, 2023.

The decrease was primarily due to the following:

● a decrease of $2.8 million in Penn expenses related to the pausing of certain programs in our preclinical portfolio and reduction of post-IND support for our clinical stage programs;

● a decrease of $2.6 million in wages and benefits related to reductions in headcount;

● a decrease of $2.4 million in clinical operations expenses driven by lower activity in supporting the GM1 and Krabbe programs, partially offset by increased activity for FTD;

● a decrease of $1.8 million in share-based compensation expense related to reductions in headcount;

● a decrease of $1.6 million in chemistry, manufacturing and control expenses primarily related to lower external manufacturing expenses, most significantly related to (i) reduced external manufacturing activities for our GM1 program and (ii) reduced expenses for Clean Room Suite fees related to the Amended Catalent Agreements;

● a decrease of $0.8 million in professional fees;

● a decrease of $0.4 million in facility and other expenses.

These decreases were partially offset by:

● an increase of $0.2 million for pre-clinical studies to evaluate the efficacy of PBFT02 in models of neurodegenerative disorders.

General and Administrative Expenses

General and administrative expenses decreased by $14.1 million to $13.0 million for the six months ended June 30, 2024 from $27.1 million for the six months ended June 30, 2023.

The decrease was primarily due to the following:

● a decrease of $11.3 million related to expenses incurred in conjunction with the Amended Catalent Agreements during the six months ended June 30, 2023;

● a decrease of $1.6 million in wages and benefits related to reductions in headcount;

● a decrease of $1.5 million in share-based compensation expense related to reductions in headcount;

● a decrease of $0.3 million in facility and other expenses.

These decreases were partially offset by:

● an increase of $0.6 million for professional services and consulting.

Impairment of Long-Lived Assets

During the six months ended June 30, 2024, we recorded $0.4 million of impairment expenses related to property and equipment for a construction in progress asset we no longer plan to deploy.

During the six months ended June 30, 2023, we did not record any impairment expense.

Other Income (Expense), Net

Other income (expense), net decreased by $0.4 million to $2.7 million for the six months ended June 30, 2024 from $3.1 million for the six months ended June 30, 2023.

The decrease was primarily due to the following:

● a decrease of $0.5 million attributable to the sale of certain tax credits during the six months ended June 30, 2023, and

● a decrease of $0.2 million attributable to interest income and the amortization of premium and discount on our marketable securities.

These decreases were partially offset by:

● an increase of $0.3 million attributable to income from subleases.

Liquidity and Capital Resources

As of March 31, 2024, we had $104.5 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $611.2 million.

We expect our existing cash, cash equivalents and marketable securities will enable us to fund our operating expense and capital expenditures into the fourth quarter of 2025.

As of June 30, 2024, we had $91.8 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $627.2 million.

Funding Requirements

21 unchanged sentences

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, further reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

On March 5, 2021, we entered into a Sales Agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, relating to the applicable terms of at-the-market equity offerings, or the ATM Facility, pursuant to which we may, but are not obligated to, offer and sell, from time to time, shares of our common stock with an aggregate offering price up to $125.0 million through Cowen, as sales agent in ATM Facility.

During the three months ended March 31, 2024, we issued 6,000,000 shares of common stock under the ATM Facility, resulting in net proceeds of $8.7 million after deducting offering costs of $0.3 million.

We issued 6,000,000 shares of common stock under the ATM Facility, resulting in net proceeds of $8.7 million, after deducting offering costs of $0.3 million in March 2024.

We are limited to $50 million in our capacity to offer and sell shares of our common stock under this sales agreement pursuant to our shelf registration statement on Form S-3, filed on March 4, 2024.

As of June 30, 2024, $50 million of capacity remains available to be sold under the ATM Facility.

The following table shows a summary of our cash flows for the periods indicated:

Three months ended

Six months ended

(in thousands)

4 unchanged sentences

Net Cash Provided by (Used in) Operating Activities

During the three months ended March 31, 2024, we used $18.9 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $16.7 million and a net increase in our operating assets of $4.2 million, partially offset by non-cash charges of $2.0 million related to depreciation, amortization, share-based compensation, and amortization of premium and discount, net.

During the six months ended June 30, 2024, we used $32.1 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $32.7 million and a net increase in our operating assets of $3.8 million, partially offset by non-cash charges of $4.4 million related to depreciation, amortization, share-based compensation, and amortization of premium and discount, net, and impairment of long-lived assets.

The primary use of cash was to fund our operations related to the development of our product candidates.

During the three months ended March 31, 2023, we used $22.4 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $34.3 million and a net decrease in our operating assets of $8.2 million, partially offset by non-cash charges of $3.7 million related to share-based compensation, depreciation, amortization, and amortization of premium and discount, net.

During the six months ended June 30, 2023, we used $39.6 million of net cash in operating activities.

Cash used in operating activities reflected a net loss of $58.2 million, partially offset by a net decrease in our operating assets of $10.6 million and non-cash charges of $8.0 million related to share-based compensation, depreciation, amortization, amortization of premium and discount, net, and loss on disposal of property and equipment.

The primary use of cash was to fund our operations related to the development of our product candidates.

Net Cash Provided by (Used in) Investing Activities

During the three months ended March 31, 2024 , we purchased $13.8 million in marketable securities, and had sales and maturities of $39.1 million in marketable securities.

We did not make any purchases of property and equipment for the three months ended March 31, 2024.

During the three months ended March 31, 2023, we purchased $51.4 million in marketable securities, and had sales and maturities of $72.6 million in marketable securities.

Purchases of property and equipment were de minimus for the three months ended March 31, 2023.

During the six months ended June 30, 2024 , we purchased $50.8 million in marketable securities, and had sales and maturities of $77.1 million in marketable securities.

We did not make any purchases of property and equipment for the six months ended June 30, 2024.

During the six months ended June 30, 2023, we purchased $73.5 million in marketable securities, and had sales and maturities of $108.8 million in marketable securities.

Purchases of property and equipment were $0.1 million for the six months ended June 30, 2023.

Net Cash Provided by (Used in) Financing Activities

During the three months ended March 31, 2024, we received $8.7 million in net proceeds from the issuance of common stock under the ATM Facility.

During the six months ended June 30, 2024, we received $8.7 million in net proceeds from the issuance of common stock under the ATM Facility.

We received gross proceeds of $9.0 million, net of offering costs of $0.3 million.

During the three months ended March 31, 2023, we had no gross receipts or outflows of cash related to financing activities.

We received $0.1 million in proceeds from the issuance of common stock under the ESPP and exercises of employee stock options.

During the six months ended June 30, 2023, we received $0.1 million in proceeds from the issuance of common stock under the ESPP.

Contractual Obligations and Other Commitments

11 unchanged sentences

The aggregate estimated rent payments due over the initial term of the lease is approximately $40.3 million, with rent payments that began in 2021.

As a result of the Amended Catalent Agreements, we no longer have an annual minimum commitment of $10.6 million per year owed to Catalent through November 2025.

As of March 31, 2024, the Company has made payments of $4.0 million under the Amended Catalent Agreements and made the final payment of $2.0 million in May 2024.

Under the exclusive relationship under the Amended Catalent Agreements, following certain conditional events related to the divestiture by us of either FTD or GM1, we would pay Catalent certain fees.

Under the Penn Agreement, we agreed to fund discovery research conducted by GTP for five years, which began in May 2020.

Our funding commitment is $5.0 million annually through June 2026.

Our funding commitment was $5.0 million annually through June 2026.

As a result of the Outlicense Transaction Agreements, we have amended the Penn Agreement to eliminate this commitment as of July 31, 2024.

No discovery research funding commitments exist under the Gemma Collaboration Agreement.

These contractual obligations and commitments are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.

Payments due upon cancellation consisting only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation are not included as the amount and timing of such payments are not known.

The contractual obligations and commitments above do not include any potential milestone or royalty payments that we may be required to make under the Penn Agreement.

The contractual obligations and commitments above do not include any potential milestone or royalty payments that we may be required to make under the Penn License Agreement.

Under the Gemma Sublicenses, Gemma will be responsible for all potential milestone and royalty payments to Penn for the Outlicensed Programs.

Critical Accounting Policies and Estimates

During the three months ended March 31, 2024, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our 2023 Annual Report filed on Form 10-K.

During the six months ended June 30, 2024, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our 2023 Annual Report filed on Form 10-K.

JOBS Act Accounting Election

6 unchanged sentences

We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million.

If we are a smaller reporting

company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis