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Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-02-27 · 86 added, 68 removed, 183 unchanged (46% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 202 3 Annual Report on Form 10-K filed with the U.S.

Securities and Exchange Commission (“SEC on March 9, 2023”).

Securities and Exchange Commission (“SEC" on February 27, 2024).

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.

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We have applied our deep understanding of fibrosis biology, along with our medicinal chemistry and translational medicine expertise to develop a set of proprietary tools designed to discover and de-risk product candidates quickly and efficiently.

Our wholly-owned lead product candidate, bexotegrast (PLN-74809), is an oral, small molecule, dual selective inhibitor of αvß6 and αvß1 integrins that we are developing for the treatment of idiopathic pulmonary fibrosis, or IPF, and primary sclerosing cholangitis, or PSC.

We are currently conducting a Phase 2b trial in IPF and a Phase 2a trial in PSC.

We announced positive data from our Phase 2a INTEGRIS-IPF trial in May 2023.

We are currently conducting BEACON-IPF, a 52-week, randomized, double-blind, placebo-controlled Phase 2b trial in patients with IPF.

We announced positive interim data from our Phase 2a INTEGRIS-PSC trial in September 2023 and February 2024.

We expect to release final data from the INTEGRIS-PSC trial in mid-2024.

In January 2023, we received FDA clearance of investigational new drug application, or IND, for our third clinical program to date, PLN-101095, a dual inhibitor of integrins αvß8 and αvß1 for the treatment of solid tumors that are resistant to immune checkpoint inhibitors.

We are currently dosing the third of five dose cohorts in a Phase 1 open label dose-escalation trial of PLN-101095 as monotherapy and in combination with pembrolizumab in patients with solid tumors that are resistant to immune checkpoint inhibitors.

We expect to release preliminary data from the trial in late 2024.

Our fourth program to date, PLN-101325, in development for treatment of muscular dystrophies, including Duchenne muscular dystrophy.

Our wholly owned lead product candidate, bexotegrast, is an oral, small molecule, dual selective inhibitor of αvβ6 and αvβ1 integrins that we are developing for the treatment of idiopathic pulmonary fibrosis, or IPF.

We have recently discontinued BEACON-IPF trial, a global Phase 2b trial in patients with idiopathic pulmonary fibrosis (IPF).

While an imbalance in unadjudicated IPF-related adverse events between the treatment and placebo groups led to the discontinuation of the trial, early evidence of efficacy on the forced vital capacity (FVC) endpoint was also observed.

The Company plans to analyze the complete data from the BEACON-IPF trial and evaluate next steps for bexotegrast’s development.

In January 2023, we received United States Food and Drug Administration, or FDA, clearance of an investigational new drug application, or IND, for PLN-101095, a small molecule, dual selective inhibitor of integrins αvβ8 and αvβ1 for the treatment of solid tumors that are resistant to immune checkpoint inhibitors.

We are currently dosing the fourth of five dose cohorts in a Phase 1 open-label dose-escalation trial of PLN-101095 as monotherapy and in combination with pembrolizumab in patients with solid tumors that are resistant to immune checkpoint inhibitors.

Preliminary data from cohorts one through three is expected in the first quarter of 2025.

Our Phase 1-ready program PLN-101325, is in development for treatment of muscular dystrophies, including Duchenne muscular dystrophy.

PLN-101325 is a monoclonal antibody designed to act as an allosteric agonist of integrin α7β1.

We expect to file with regulators for first-in-human studies in the first quarter of 2024.

We have developed PLN-1474, a Phase 2-ready oral, small molecule selective inhibitor of αvß1 for the treatment of advanced liver fibrosis associated with nonalcoholic steatohepatitis, or NASH.

PLN-1474 was licensed to Novartis in 2019, and as part of a broad strategic realignment, Novartis has discontinued clinical development in NASH and, as a result, discontinued development of PLN-1474.

In February 2023, Novartis returned global rights to PLN-1474 to Pliant.

Recent Highlights

PLN-101325 has received a clinical trial approval (CTA) in Australia.

We have also developed PLN-1474, an oral, small molecule selective inhibitor of αvß1 for the treatment of liver fibrosis associated with nonalcoholic steatohepatitis, or MASH.

Global rights to PLN-1474, licensed to Novartis in 2019, were returned to Pliant in 2023 upon termination of our collaboration and license agreement.

Recent Events

Bexotegrast Highlights

• Positive safety and efficacy data from 320 mg dose cohort of INTEGRIS-PSC Phase 2a trial in patients with primary sclerosing cholangitis (PSC).

At a once-daily dose of 320 mg, bexotegrast was well tolerated over 12 weeks of treatment with no drug-related severe or serious adverse events.

At the 320 mg dose, bexotegrast reduced both Enhanced Liver Fibrosis (ELF) scores and PRO-C3 levels and showed improvements in hepatocyte function and bile flow by contrast MRI imaging relative to placebo at Week 12.

Twenty-four-week data from the 320 mg dose group is expected in mid-2024.

• Enrollment continues in BEACON-IPF, a Phase 2b trial of bexotegrast in patients with idiopathic pulmonary fibrosis ( IPF).

BEACON-IPF is a 52-week, multinational, randomized, dose-ranging, double-blind, placebo-controlled trial evaluating bexotegrast at once-daily doses of 160 mg or 320 mg.

BEACON-IPF is expected to enroll approximately 270 patients with IPF.

Pipeline Programs

• Phase 1 trial of PLN-101095 in solid tumors is enrolling.

• BEACON-IPF discontinued following recommendation from expanded data safety monitoring board (DSMB).

Following a prespecified data review and recommendation by the trial’s independent DSMB, as well as a secondary review and recommendation by an outside expert panel, Pliant has discontinued the BEACON-IPF Phase 2b trial.While an imbalance in unadjudicated IPF-related adverse events between the treatment and placebo groups led to the discontinuation of the trial, early evidence of efficacy on the forced vital capacity (FVC) endpoint was also observed.

The Company plans to analyze the complete data from the BEACON-IPF trial and evaluate next steps for bexotegrast’s development.

BEACON-IPF is a 52-week, multinational, randomized, dose-ranging, double-blind, placebo-controlled trial evaluating bexotegrast at once-daily doses of 160 mg or 320 mg in patients with idiopathic pulmonary fibrosis (IPF).

Oncology Program

• Phase 1 trial of PLN-101095 in solid tumors continues to enroll, with interim data expected in the first quarter 2025.

This is a Phase 1 open label trial of PLN-101095, an oral, small molecule, dual selective inhibitor of αvβ8 and αvβ1 integrins designed to block TGF-β activation in the tumor microenvironment.

The trial is currently dosing the third of five planned dose cohorts in a Phase 1 open label dose-escalation trial of PLN-101095 as monotherapy and in combination with pembrolizumab in patients with solid tumors that are resistant to immune checkpoint inhibitors.

Preliminary data is expected in late 2024.

• Muscular dystrophy program on track for regulatory filing in the first quarter of 2024.

PLN-101325 is a monoclonal antibody designed to act as an allosteric agonist of integrin α7β1.

Filing for first-in-human clinical studies in Duchenne muscular dystrophy (DMD) is expected in the first quarter of 2024.

The trial is currently dosing the fourth of five planned dose cohorts in a Phase 1 open label dose-escalation trial of PLN-101095 as monotherapy and in combination with pembrolizumab in patients with solid tumors that are resistant to immune checkpoint inhibitors.

Interim data from the first three cohorts is expected in the first quarter of 2025.

Neuromuscular Program

• PLN-101325 for treatment of muscular dystrophies.

PLN-101325 is a monoclonal antibody that acts as an allosteric agonist of integrin α7β1, currently in development for treatment of muscular dystrophies.

PLN-101325 is Phase 1 ready with clinical trial approval (CTA) open in Australia.

Corporate Highlights

• Appointment of Delphine Imbert, Ph.D.

as Chief Technical Officer.

Imbert brings 25 years of product development, process optimization and manufacturing experience across multiple drug modalities.

Most recently, Dr.

Imbert served as Senior Vice President of CMC and Technical Operations at Chinook Therapeutics.

Since inception, we have had significant operating losses.

Our net loss was $210.3 million, $161.3 million and $123.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.

As of December 31, 2023, we had an accumulated deficit of $499.7 million and cash, cash equivalents, restricted cash and short-term investments of $495.7 million.

As of December 31, 2024, we had an

accumulated deficit of $710.1 million and cash, cash equivalents, restricted cash and short-term investments of $357.2 million.

We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will increase in connection with our ongoing activities, as we:

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Under the terms of the Novartis Agreement, we received an upfront license fee payment of $50.0 million for the worldwide, exclusive license to PLN-1474 and an additional $29.0 million upon the achievement of specified research and development milestones.

As part of a broad strategic realignment, Novartis has discontinued clinical development in NASH and, as a result, discontinued development of PLN-1474.

Novartis discontinued clinical development in MASH and, as a result, discontinued development of PLN-1474.

In February 2023, Novartis issued a termination notice for the collaboration and license agreement, and returned global rights to Pliant for PLN-1474.

Following termination of the Novartis Agreement, we were no longer eligible to receive additional milestone or royalty payments under the arrangement, however, we continued to earn research and development services revenues through the effective termination date of April 18, 2023.

Revenues for the years ended December 31, 2023, 2022 and 2021 were $1.6 million, $9.7 million and $7.6 million respectively.

Revenues for the years ended December 31, 2024, 2023 and 2022 were nil, $1.6 million and $9.7 million respectively.

Operating Expenses

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• depreciation of laboratory equipment and costs of equipment and supplies;

• costs associated with technology and intellectual property licenses;

• facilities and other allocated expenses, which include expenses for rent and other facility related costs and other supplies.

• facilities expenses, which include expenses for rent and other facility related costs;

• other expenses and other allocations associated with research and development

The following table summarizes our research and development expenses for the years ended December 31, 2024, 2023 and 2022 (in thousands):

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Depreciation of lab equipment and costs of equipment and supplies 6,717 5,588 5,854

Facilities and other allocated expenses

10,326 9,242 5,880

Technology and intellectual property licenses

Facilities expenses 7,776 4,288 3,757

Other expenses and other allocations 8,095 6,063 5,434

Total research and development expenses $ 169,310 $ 127,797 $ 96,936

We expense all research and development costs in the periods in which they are incurred.

We do not allocate our internal costs by product candidates or by preclinical programs.

Additionally, although external third-party costs are allocable between product candidates and programs, we do not perform this allocation.

We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates and our preclinical programs and as they advance into later stages of development.

We do not allocate our internal costs by product candidates or by preclinical programs as these are in early stages of clinical trials or development, and any such allocation would involve significant estimates and judgments and, accordingly, would be imprecise.

Where appropriate, we allocate our third-party research and development expense by product candidate or preclinical program.

These expenses primarily relate to outside consultants, clinical research organizations, contract manufacturing organization.

When we refer to the research and development expenses associated with a specific product candidate or preclinical program, these refer exclusively to the allocated third-party expenses associated with that product candidate.

Due to the discontinuation of the BEACON-IPF Phase 2b/3 trial in IPF, we expect research and development expenses to decrease in the near term as we curtail spending on the BEACON-IPF trial.

While we plan to analyze data from the BEACON-IPF trial and evaluate next steps for bexotegrast's development, in the near term we will re-prioritize our development of product candidates that are in earlier, less capital intensive stages of development.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain.

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Our general and administrative expenses consist primarily of salaries, benefits and stock-based compensation for our general and administrative personnel, allocated facilities costs, insurance and other expenses for outside professional services, including legal, marketing, investor relations, human resource and accounting services.

We expect general and administrative expenses to increase for the foreseeable future as does the size of our administrative function to support the growth of our business.

We expect general and administrative expenses to remain relatively consistent for the foreseeable future.

In addition, if we obtain regulatory approval for any of our product candidates and do not enter into a third-party commercialization collaboration, we expect to incur significant expenses related to building a sales and marketing team to support product sales, marketing and distribution activities.

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Interest Expense

Our interest expense is derived from a term loan executed under the Oxford Loan Agreement that we entered into in May 2022.

Borrowings under the Oxford Loan Agreement bear interest at a rate per annum equal to 1-month term Secured Overnight Financing Rate (SOFR) plus 8.5%, subject to an agreed upon floor and cap.

Our interest expense is derived from a term loan executed under the Oxford Loan Agreement that we entered into in May 2022 and amended in March 2024 (the "Amended Loan Agreement").

Borrowings under the Amended Loan Agreement bear interest at a rate per annum equal to 1-month term Secured Overnight Financing Rate (SOFR) plus 5.25%, subject to an agreed upon floor of 8.75%.

Results of Operations

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Research and Development Expenses

The following table summarizes the results of our research and development expenses for the years ended December 31, 2024 and 2023 (in thousands):

Program-specific external expenses:

Bexotegrast - clinical trial and outside service third party contracting costs 86,365 51,446

Other pipeline programs - clinical trial and outside service third party contracting costs 10,760 13,754

Total program-specific external expenses 97,125 65,200

Unallocated internal expenses

Employee-related expenses 49,597 46,658

Depreciation of lab equipment and costs of equipment and supplies 6,717 5,588

Facilities expenses 7,776 4,288

Other expenses and other allocations 8,095 6,063

Total unallocated internal expenses 72,185 62,597

Total research and development expenses 169,310 127,797

The increase in research and development expenses of $41.5 million was primarily due to:

• $34.9 million increase related to bexotegrast development primarily driven by BEACON-IPF, a Phase 2b/3 study of bexotegrast in patients with IPF, and related manufacturing activities;

• $3.0 million decrease in others pipeline programs as we prioritized BEACON-IPF;

• $2.9 million increase in employee-related costs, including stock-based compensation, driven by an increase in our research and development workforce;

• $9.5 million decrease in outside and consulting services for preclinical studies which is largely attributable to decreased preclinical spend related to PLN-101095 as we initiated a phase 1 clinical trial during the second quarter of 2023, and an overall decrease in research and development activities as we prioritize bexotegrast clinical development;

• $23.2 million increase in clinical trial expenses largely due to continued development of bexotegrast, in particular our Phase 2b trial in patients with IPF, as well as the initiation of our phase 1 trial of PLN-101095 in solid tumors during the second quarter of 2023;

• $0.3 million decrease in depreciation of lab equipment and costs of equipment and supplies;

• $1.1 million increase in facilities and other allocated expenses.

• $5.5 million increase in facilities and other allocated expenses, resulting from the move to our new office and laboratory space.

General and Administrative Expenses

The increase in general and administrative expenses by $18.0 million was primarily due to a $16.6 million increase in employee-related costs, including a $12.6 million increase in stock-based compensation, and increases in accounting and other professional services.

General and administrative expenses increased by $1.1 million primarily due to an increase in employee-related costs driven by increased headcount.

Interest and Other Income (Expense), Net

Interest and other income (expense), net increased $19.4 million due to higher average investment balances in 2023 compared to 2022 resulting from significant financing activities occurring mid-year 2022 and the public offering in January 2023, coupled with an increase in the yield on our short-term investment portfolio.

Interest and other income (expense), net decreased $3.0 million due to lower average investment balances in 2024 compared to 2023 due to continued funding of operating activities.

Interest Expense

Interest expense increased $0.5 million during the year as our Term Loan, issued in the second quarter of 2022, was outstanding the entire year of 2023 compared to eight months in the prior year.

Interest expense increased $1.8 million due to additional borrowings under the Amended Loan Agreement executed March 11, 2024.

Liquidity and Capital Resources

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Government Agency securities and highly rated, investment-grade corporate debt securities.

In May 2022, as amended in October 2022, we entered into a Loan and Security Agreement (the “Oxford Loan Agreement”) with Oxford Finance LLC (or "Oxford").

Upon closing of the Oxford Loan Agreement, we drew $10.0 million and decided to forego drawing on the additional $65.0 million that became available to us over the course of 2023 as certain conditions related to the development of bexotegrast and one of our preclinical product candidates were satisfied.

At December 31, 2023, $25.0 million remained available to us under the Oxford Loan Agreement.

In March 2024, we entered into an Amended Loan Agreement with Oxford Finance LLC (or the “Lender” or “Oxford”) which upsized our existing Term Loan facility to a total size of $150.0 million of non-dilutive capital.

Pursuant to the Amended Loan Agreement, we drew an additional Term Loan of $20.0 million.

The agreement allowed for borrowing up to $70.0 million at our option, $35.0 million being available commencing October 1, 2025 contingent upon the continued operation of the BEACON-IPF study and a further $35.0 million being available upon demonstrating that BEACON-IPF had achieved positive Phase 2b data sufficient to support continued development, in the sole discretion of Oxford.

An additional $50.0 million could be made available to us at the sole discretion of Lender.

Given the discontinuation of the BEACON-IPF trial, we do not expect to have access to additional borrowing under the Oxford Agreement.

See Note 7 to the Notes to our financial statements of this Report for more information.

In July 2022, we completed an underwritten public offering of 12,432,432 shares of common stock, including the exercise in full of the underwriters' option to purchase 1,621,621 additional shares of common stock.

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We have not issued any shares pursuant to any at-the-market offerings, including pursuant to the Sales Agreement, but may do so at a future date.

We believe that our existing capital resources, together with the funds available to us under the Oxford Loan Agreement, will be sufficient to fund our anticipated operating expenses and capital expenditure requirements for the next 12 months and for the longer-term period into the second half of 2026.

We believe that our existing capital resources will be sufficient to fund our anticipated operating expenses and capital expenditure requirements for the next 12 months and beyond.

We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for product development and commercialization sooner than planned.

Our operations have been financed primarily through the issuance and sale of common stock and convertible preferred stock and our collaboration with Novartis.

Our operations have been financed primarily through the issuance and sale of common stock and convertible preferred stock and our prior collaboration with Novartis.

Funding Requirements

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• the outcome, timing and cost of meeting regulatory requirements established by the U.S.

Food and Drug Administration, or FDA, and other comparable foreign regulatory authorities including but not limited to the European Medicines Agency (EMA), the U..

Food and Drug Administration, or FDA, and other comparable foreign regulatory authorities including but not limited to the European Medicines Agency (EMA) and the U.K.

Medicines and Healthcare products Regulatory Agency (MHRA);

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Net cash used in operating activities $ (155,503) $ (116,361) $ (94,631)

Net cash (used in) provided by investing activities

(127,012) (150,204) 73,699

Net cash provided by (used in) investing activities 140,340 (127,012) (150,204)

Net cash provided by financing activities 23,117 274,405 226,854

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Cash Used in Operating Activities

The increase in cash used in operating activities of $21.7 million between the year ended December 31, 2023 and 2022 was primarily due to an increase in our operating expenses, notably for the continued development of bexotegrast and our other pipeline programs.

Further, revenue related receipts decreased $6.2 million as we ceased to earn research and development services revenue following the termination of the Novartis Agreement.

Cash Used in Investing Activities

The decrease in cash used in investing activities of $23.2 million between the year ended December 31, 2023 and 2022 is primarily due to the timing of purchases of short-term investments compared to related maturities during each year.

Net cash used in operating activities increased due to higher spending related to third-party vendors to support research and development and general and administrative operations:

approximately $27.0 million paid to outside service vendors in support of BEACON-IPF and an increase of $9.5 million in payroll and related employee costs.

Cash Provided (Used in) Investing Activities

Net cash provided by investing activities increased over the same period of prior year as maturities of marketable securities exceeded related purchases during the twelve months ended December 31, 2024, while purchases exceeded maturities during the twelve months ended December 31, 2023 as a result of the public offering of common stock in January 2023.

Cash Provided by Financing Activities

The increase in cash provided by financing activities of $47.6 million between the year ended December 31, 2023 and 2022 is primarily due to net proceeds from the Company's January 2023 underwritten public offering.

Net cash provided by financing activities decreased by $251.3 million primarily due to net proceeds of $270.3 million from the Company's January 2023 underwritten public offering, which was partially offset by additional Term Loans entered into during the twelve months ended December 31, 2024 associated with the Amended Loan Agreement.

Off-Balance Sheet Arrangements

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Material Cash Requirements

At December 31, 2023, we had various non-cancelable operating leases for office space and equipment, which expire between December 31, 2023 and March 31, 2031.

At December 31, 2024, we have a non-cancelable operating lease for office and laboratory space for a period of seven years through March 31, 2031.

Refer to Note 14 and Note 15 to our financial statements appearing elsewhere in this Annual Report for a discussion of material obligations and commitments.

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As of December 31, 2024, all of our revenue to date has been generated from the Novartis Agreement.

We recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

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The arrangements also have options for additional items (i.e., license rights).

Options are considered to be marketing offers and are to be accounted for as separate contracts when the customer elects such options, unless we determine the option provides a material right which would not be provided without entering into the contract.

The determination as to whether such options are material rights requires significant management judgment, and management

considers factors such as other similar arrangements, market data and the terms of the contractual arrangement to make such conclusion.

Options are considered

to be marketing offers and are to be accounted for as separate contracts when the customer elects such options, unless we determine the option provides a material right which would not be provided without entering into the contract.

The determination as to whether such options are material rights requires significant management judgment, and management considers factors such as other similar arrangements, market data and the terms of the contractual arrangement to make such conclusion.

Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer.

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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-K

Item 7. Management’s Discussion and Analysis