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Item 7. Management’s Discussion and Analysis

2023-02-07 compared with 2022-02-28 · 99 added, 111 removed, 220 unchanged (49% of the section changed)

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As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, 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 translating genetic insights into the development of therapies for central nervous system, or CNS, disorders characterized by neuronal excitation-inhibition imbalance.

Normal brain function requires a delicate balance of excitation and inhibition in neuronal circuits, which, when dysregulated, can lead to abnormal function and disease.

We are applying insights from genetic epilepsies to both rare and more prevalent neurological and psychiatric disorders, using our understanding of shared biological targets and circuits in the brain.

We apply a deliberate and pragmatic precision approach, leveraging a suite of translational tools including novel transgenic and predictive translational animal models and electrophysiology markers, to enable an efficient path to proof-of-concept in patients.

Through this approach, we have established a broad CNS portfolio with multiple programs, including product candidates across psychiatric disorders, movement disorders, epilepsy and other exploratory CNS indications, with three clinical-stage product candidates.

Each of our clinical-stage product candidates is advancing in more than one indication and we anticipate expansion into additional indications.

We expect multiple topline readouts from our clinical-stage programs and anticipate the launch of a fourth clinical development program in 2022.

In addition, we have established a robust pipeline of preclinical stage programs through internal research and in-licensing.

Our broad portfolio of CNS programs is currently structured by therapeutic focus in three primary franchises – Psychiatry, Movement Disorders and Epilepsy.

In addition, we are pursuing development in other exploratory CNS indications such as rare adult cephalgias.

Within our Psychiatry franchise, our most advanced clinical candidate, PRAX-114, is being developed for the treatment of a broad range of patients suffering from major depressive disorder, or MDD, and post-traumatic stress disorder, or PTSD.

We expect to report topline results from the Aria Study, a Phase 2/3, placebo-controlled study evaluating PRAX-114 for monotherapy treatment of MDD, in the second quarter of 2022.

We also expect to report topline results from the Acapella Study, a Phase 2, placebo-controlled, dose-ranging study evaluating PRAX-114 for treatment of MDD, in mid-2022.

In addition, we have initiated a Phase 2, placebo-controlled study evaluating PRAX-114 for the treatment of PTSD and expect to report topline results in the second half of 2022.

Within our Movement Disorders franchise, our second clinical candidate, PRAX-944, is being developed for the treatment of Essential Tremor, or ET, and Parkinson's Disease, or PD.

We anticipate reporting topline results from the second cohort of our ongoing Phase 2a trial evaluating PRAX-944 for the treatment of ET in the second quarter of 2022, including both open-label and placebo-controlled, randomized withdrawal period results.

We have initiated a Phase 2b placebo-controlled, dose-range finding trial, the Essential1 Study, to evaluate the tolerability, safety and efficacy of PRAX-944 in adults with ET and we expect to report topline results in the second half of 2022.

We also expect to initiate a Phase 2, placebo-controlled, crossover study to evaluate the safety, pharmacokinetics, or PK, and efficacy of daytime dosing of PRAX-114 for the treatment of ET in the first quarter of 2022 and expect to report topline results in the second half of 2022.

We expect to initiate a Phase 2, placebo-controlled trial to evaluate the safety, PK and efficacy of PRAX-944 as a non-dopaminergic treatment for the motor symptoms of PD in the second quarter of 2022.

Within our Epilepsy franchise, we expect to initiate a Phase 2 study with our third clinical-stage candidate, PRAX-562, in the second quarter of 2022 in patients with rare pediatric Developmental and Epileptic Encephalopathies.

Our most advanced preclinical stage product candidate within our Epilepsy franchise, PRAX-222, is an antisense oligonucleotide, or ASO, designed to decrease the expression levels of the protein encoded by the gene SCN2A in patients with gain-of-function SCN2A mutations.

We expect to initiate a seamless study of PRAX-222 in the second quarter of 2022, which would be our fourth program to reach clinical stage.

We also expect to initiate a Phase 2 proof-of-concept clinical trial evaluating PRAX-562 in patients with rare adult

cephalgias in the first quarter of 2022.

In addition, our preclinical pipeline consists of a discovery program in development for KCNT1 related epilepsy, PRAX-628, a product candidate nominated in the fourth quarter of 2021 for focal epilepsy, three ASOs targeting SCN2A in patients with loss-of-function mutations, PCDH19 and SYNGAP1, respectively, and three additional discovery programs for undisclosed targets in psychiatry, movement disorders and epilepsy.

As noted in our Company Overview in Part I of this report, we are a clinical-stage biopharmaceutical company translating insights from genetic epilepsies into the development of therapies for central nervous system, or CNS, disorders characterized by neuronal excitation-inhibition imbalance.

Normal brain function requires a delicate balance of excitation and inhibition in neuronal circuits, which, when dysregulated, can lead to abnormal function and both rare and more prevalent neurological disorders.

We are applying genetic insights to the discovery and development of therapies for neurological disorders through two proprietary platforms, using our understanding of shared biological targets and circuits in the brain.

Each platform currently has multiple programs, with significant potential for additional program and indication expansion:

• Cerebrum ™, our small molecule platform, utilizes deep understanding of neuronal excitability and neuronal networks and applies a series of computational and experimental tools to develop orally available precision therapies

• Solidus ™, our antisense oligonucleotide, or ASO, platform, is an efficient, targeted precision medicine discovery and development engine anchored on a proprietary, computational methodology

Our platforms utilize a deliberate, pragmatic and patient-guided approach, leveraging a suite of translational tools, including novel transgenic and predictive translational animal models and electrophysiology markers, to enable an efficient path to proof-of-concept in patients.

Through this approach, we have established a diversified, multimodal CNS portfolio with four clinical-stage product candidates across movement disorders and epilepsy.

For our most advanced product candidate under the Cerebrum™ platform, ulixacaltamide (formerly known as PRAX-944), we expect to announce topline results from the Phase 2b Essential1 clinical trial in essential tremor, or ET, in the first quarter of 2023.

We also plan to initiate an ulixacaltamide Phase 2 clinical trial in Parkinson's disease, or PD, in the first quarter of 2023 and expect topline results in the fourth quarter of 2023.

We plan to initiate our PRAX-562 Phase 2 EMBOLD study in the first quarter of 2023, with initial cohorts in SCN2A-DEE and SCN8A-DEE, and expect to announce topline results for both cohorts in the second half of 2023.

We also initiated a Phase 1 healthy volunteer study of PRAX-628 in the fourth quarter of 2022 and expect to report topline results in mid-2023.

For our most advanced product candidate under the Solidus™ platform, PRAX-222, we expect to announce topline results from the first dose cohort of our EMBRAVE study in mid-2023.

For further details on our business, refer to the Business section of Part I of this report.

We were incorporated in 2015 and commenced operations in 2016.

Since inception, we have devoted substantially all of our resources to developing our preclinical and clinical product candidates, building our intellectual property, or IP, portfolio, business planning, raising capital and providing general and administrative support for these operations.

We employ a “virtual” research and development model, relying heavily upon external consultants, collaborators and contract research organizations, or CROs, to conduct our preclinical and clinical activities.

We employ a “virtual” research and development model, relying heavily upon external consultants, collaborators, contract development and manufacturing organizations and contract research organizations, or CROs, to conduct our preclinical and clinical activities.

Since inception, we have financed our operations primarily with proceeds from the sale and issuance of equity securities.

On May 18, 2021, we completed a follow-on public offering in which we issued and sold 5,750,000 shares of our common stock at a public offering price of $18.25 per share, including 750,000 shares of common stock issued and sold pursuant to the underwriters' exercise, in full, of their option to purchase additional shares of common stock, for aggregate gross proceeds of $104.9 million.

We received approximately $98.4 million in net proceeds after deducting discounts, commissions and offering expenses payable by us.

On November 3, 2021, we entered into an Open Market Sale Agreement, or the sales agreement, with Jefferies LLC, or Jefferies, to provide for the offering, issuance and sale of up to an aggregate amount of $125.0 million of common stock from time to time in at-the-market offerings for which Jefferies acts as sales agent.

As of December 31, 2021, we issued and sold 391,997 shares under the sales agreement for aggregate gross proceeds of $7.6 million.

We received approximately $7.0 million of net proceeds after deducting commissions and offering expenses payable by us.

We are a development stage company and we have not generated any revenue from product sales, and do not expect to do so for several years, if at all.

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We have incurred recurring operating losses since inception, including net losses of $214.0 million and $167.1 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2021, we had an accumulated deficit of $316.6 million.

As of December 31, 2022, we had an accumulated

deficit of $530.6 million.

We expect to incur significant expenses and operating losses for the foreseeable future as we expand our research and development activities.

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We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

• advance our lead product candidates, PRAX-114 and PRAX-944, to late stage clinical trials;

• advance our PRAX-562 product candidate to Phase 2 clinical trials;

• advance our PRAX-222 product candidate to clinical trials;

• advance our lead product candidate, ulixacaltamide, to a late stage clinical trial for the treatment of ET;

• advance ulixacaltamide in our Phase 2 clinical trial for the treatment of PD;

• advance our PRAX-562 product candidate in the EMBOLD clinical trial;

• advance our PRAX-222 product candidate in the EMBRAVE clinical trial;

• advance our PRAX-628 product candidate in the Phase 1 clinical trial;

• advance our preclinical candidates to clinical trials;

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• acquire or in-license technology;

• secure facilities to support continued growth in our research, development and commercialization efforts;

• take temporary precautionary measures to help minimize the risk of COVID-19 to our employees;

• increase our headcount to support our development efforts and to expand our clinical development team.

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

• establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

• when needed, increase our headcount to support our development efforts and any future commercialization efforts.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy.

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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 December 31, 2021, we had cash, cash equivalents, and marketable securities of $275.9 million.

We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditures into the second quarter of 2023.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

As of December 31, 2022, we had cash, cash equivalents and marketable securities of $100.5 million, which will enable us to fund our operating expenses and capital expenditures into the first quarter of 2024.

Since our cash, cash equivalents and marketable securities as of December 31, 2022 are not sufficient to fund our operations for at least the next twelve months from the date of issuance of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, there is substantial doubt about our ability to continue as a going concern.

Our future viability is dependent on our ability to raise additional capital to finance our operations.

We expect to finance our operations through potential public or private equity financings, debt financings, collaboration agreements or other capital sources.

Our inability to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies.

There can be no assurance that the current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.

We have based our assessment on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

See “—Liquidity and Capital Resources.”

COVID-19 Business Update

In light of the ongoing COVID-19 pandemic, we continue to experience some disruptions and increased risk in our operations and those third parties upon whom we rely.

These include disruptions and risks related to the conduct of our clinical trials and preclinical studies as policies at various clinical sites and federal, state, local and foreign laws, rules and regulations continue to evolve, including quarantines, travel restrictions and redirection of healthcare resources toward pandemic response efforts.

The COVID-19 pandemic has impacted the enrollment of some of our ongoing clinical trials, including slower patient enrollment and treatment in some of our clinical studies, the impact of which has varied by clinical study and program, but none of which have significantly impacted our overall clinical trial timelines.

While we have experienced limited financial impacts to date, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic such as increased inflation, our business, financial condition and results of operations could be materially adversely affected.

We continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans, clinical development plans and response strategy.

Restructuring

In June 2022, we began a strategic realignment to focus resources on our ulixacaltamide, PRAX-562, PRAX-222 and PRAX-628 product candidates, as well as our preclinical programs across our Cerebrum™ and Solidus™ platforms, which resulted in a reduction of our workforce.

We incurred $1.0 million of costs related to the realignment, of which $0.6 million has been recognized in research and development expenses and $0.4 million has been recognized in general and administrative expenses in the consolidated statement of operations during the year ended December 31, 2022.

These costs relate to employee severance, benefits and related costs.

As of December 31, 2022, all costs related to the strategic realignment were paid.

Financial Operations Overview

We have not generated any revenue since inception and do not expect to generate any revenue from the sale of products for several years, if at all.

If our development efforts for our current or future product candidates are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements that we may enter into with third parties.

As discussed in Note 9 to our audited consolidated financial statements, we have entered into a collaboration agreement that will result in the recognition of $5.0 million of revenue upon the satisfaction of the performance obligation identified within the agreement.

Operating Expenses

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• costs incurred with third-party contract development and manufacturing organizations to acquire, develop and manufacture materials for preclinical and clinical studies;

• depreciation, amortization and other direct and allocated expenses, including rent, insurance and other operating costs, incurred as a result of our research and development activities.

• depreciation, amortization and other direct and allocated expenses, including rent and other operating costs, such as information technology, incurred as a result of our research and development activities.

We expense research and development costs as incurred.

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Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated balance sheets as prepaid expenses or accrued expenses.

Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development.

Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative

future use for the research and development.

The capitalized amounts are expensed as the related goods are delivered or the services are performed.

A significant portion of our research and development costs have been external costs.

We track direct external research and development expenses to specific franchises and product candidates upon commencement.

Due to the number of ongoing studies and our ability to use resources across several projects, indirect or shared operating costs incurred for our research and development franchises, such as personnel, facility costs and certain consulting costs, are not recorded or maintained on a franchise-specific basis.

The following table reflects our research and development expenses, including direct expenses summarized by major franchise and other exploratory CNS indications and indirect or shared operating costs recognized as research and development expenses during each period presented (in thousands):

As a company operating in a virtual environment, a significant portion of our research and development costs have been external costs.

We track direct external research and development expenses to specific platforms and product candidates upon commencement.

Due to the number of ongoing studies and our ability to use resources across platforms, indirect or shared operating costs incurred for our research and development platforms, such as personnel, facility costs and certain consulting costs, are not recorded or maintained on a platform-specific basis.

The following table reflects our research and development expenses, including direct expenses summarized by platform and indirect or shared operating costs recognized as research and development expenses during each period presented (in thousands):

Year Ended December 31,

$ 92,708 $ 72,663

Movement disorders

Other exploratory CNS indications 9,509 700

Personnel-related (including stock-based compensation) 37,392 31,090

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Product 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 that our research and development expenses will continue to increase in the foreseeable future as we advance our product candidates through the development phase, and as we continue to discover and develop additional product candidates, build manufacturing capabilities and expand into additional therapeutic areas.

We expect that our research and development expenses will be maintained or increase in the foreseeable future as we advance our product candidates through the development phase, and as we continue to discover and develop additional product candidates, build manufacturing capabilities and expand into additional therapeutic areas.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates.

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• the timing and progress of preclinical and clinical development activities;

• the number and scope of our preclinical and clinical product candidates we decide to pursue;

• the number and scope of preclinical and clinical programs we decide to pursue;

• our ability to successfully complete clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the U.S.

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• our ability to commercialize products, if approved, whether alone or in collaboration with others;

• the continued acceptable safety profiles of any product candidates following approval.

• the continued acceptable safety profiles of our product candidates.

A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate.

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We may never obtain regulatory approval for any of our product candidates.

The drug commercialization of any of our product candidates, if ever, will take several years and require significant development costs.

Drug commercialization will take several years and require significant development costs.

General and Administrative Expense

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professional fees for accounting, auditing, tax and administrative consulting services;

commercial-related costs to support market assessments and scenario planning;

insurance costs;

administrative travel expenses;

and facility-related expenses, which include direct depreciation costs and allocated expenses for office rent and other operating costs.

These costs relate to the operation of the business, unrelated to the research and development function, or any individual franchise or product candidate.

and facility-related expenses, which include direct depreciation costs and allocated expenses for office rent and other operating costs, such as information technology.

Costs to secure and defend our IP are expensed as incurred and are classified as general and administrative expenses.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the expected growth in our research and development activities and the potential commercialization of our product candidates.

These costs relate to the operation of the business and are unrelated to the research and development function or any individual platform or product candidate.

We anticipate that our general and administrative expenses may increase in the future as we increase our headcount, when needed, to support the expected growth in our research and development activities and the potential commercialization of our product candidates.

We also expect to incur additional IP-related expenses as we file patent applications to protect innovations arising from our research and development activities.

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Our income tax provision may be significantly affected by changes to our estimates.

There was no income tax benefit (provision) recognized for the year ended December 31, 2021.

The income tax benefit recognized for the year ended December 31, 2020 was not material.

There was no income tax provision recognized for the years ended December 31, 2022 and 2021.

Results of Operations

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Total other income 957 271 686

Loss before income taxes (167,061) (61,828) (105,233)

Benefit from income taxes — 8 (8)

Net loss $ (214,029) $ (167,061) $ (46,968)

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17,500 7,646 9,854

Movement disorders

18,460 4,158 14,302

Other exploratory CNS indications 9,509 700 8,809

Personnel-related (including stock-based compensation) 37,392 31,090 6,302

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The $34.8 million increase in research and development expenses was primarily attributable to the following:

• $17.6 million increase in personnel-related costs due to increased headcount, driven primarily by an increase of $8.0 million in stock-based compensation expense;

• $16.1 million increase in expense related to our psychiatry franchise, driven primarily by an increase in clinical-related and toxicology spend for our PRAX-114 Phase 2/3 Aria and Acapella clinical trials;

• $13.2 million increase in expense related to our epilepsy franchise, driven primarily by an increase in clinical-related and toxicology spend to support the initiation of our PRAX-562 Phase 2 developmental epileptic encephalopathies clinical trial and an increase in preclinical activities for our earlier stage assets;

• $14.3 million increase in expense related to our movement disorders franchise, driven primarily by an increase in toxicology and clinical-related spend for our PRAX-944 Phase 2 Essential1 clinical trial;

• $8.8 million increase in other exploratory CNS indications, driven primarily by an increase in clinical-related expenses for our PRAX-562 Phase 2 trial in Short-lasting Unilateral Neuralgiform headache attacks, Short-lasting Unilateral Neuralgiform headache with Autonomic symptoms and Trigeminal Neuralgia, as well as increased preclinical activities for our earlier stage assets;

• $5.3 million increase in other indirect research and development expenses, driven primarily by an increase in general clinical related spend, as well as increases in facility and other allocated overhead costs and technology spend and related consulting costs to support our clinical and quality operations.

• $20.0 million increase in expense related to our Cerebrum™ platform, driven primarily by:

◦ an increase in clinical, manufacturing and toxicology-related spend for our ulixacaltamide program, including our Phase 2b Essential1 clinical trial;

◦ an increase in clinical-related spend for our PRAX-114 Phase 2 clinical trials, all of which were wound down during the second and third quarters of 2022 due to our strategic realignment;

◦ an increase in clinical-related spend for our PRAX-628 Phase 1 clinical trial;

◦ an increase in costs associated with our Phase 1 PRAX-562 clinical trial in healthy volunteers and startup costs related to the EMBOLD Phase 2 clinical trial, partially offset by a decrease related to prior year toxicology-related spend for PRAX-562.

• $9.9 million increase in expense related to our Solidus™ platform, driven primarily by an increase in clinical-related spend to support the initiation of the PRAX-222 EMBRAVE clinical trial, an increase in preclinical activities for our earlier stage assets and the payment of a $2.0 million license fee to Ionis Pharmaceuticals, Inc.

in January of 2022 upon exercise of our exclusive option to obtain the rights and license to further develop and commercialize PRAX-222;

• $6.3 million increase in personnel-related costs due to changes in headcount.

General and Administrative Expense

The $30.1 million increase in general and administrative expenses was primarily attributable to the following:

• $14.6 million increase in personnel-related costs, driven primarily by increased headcount, including an increase of $9.5 million in stock-based compensation expense;

• $9.9 million increase in professional fees, driven primarily by $5.1 million of increased commercial-related spend to support market assessments of our clinical-stage programs, a $2.2 million increase in audit and legal fees and a $1.7 million increase in general and administrative infrastructure-related costs;

• $5.6 million increase in other general and administrative expenses, driven primarily by a $3.5 million increase in insurance and related costs due to our first full year as a public company, a $0.8 million increase in technology spend and a $0.7 million increase in donations and sponsorships.

The $12.9 million increase in general and administrative expenses was primarily attributable to an $11.8 million increase in personnel-related costs due to changes in headcount, including an increase of $5.3 million in stock-based compensation expense.

Other income for the years ended December 31, 2022 and 2021 was comprised of interest income on our cash, cash equivalents and marketable securities and investment premium and discount amortization.

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We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all.

To date, we have financed our operations primarily with proceeds from the sale and issuance of equity securities.

To date, we have financed our operations primarily with proceeds from the issuance of redeemable convertible preferred stock and from the sale of common stock through an initial public offering, a follow-on public offering and at-the-market offerings under our shelf registration statement.

From inception through December 31, 2022, we have raised $526.0 million in aggregate cash proceeds from such transactions, net of issuance costs.

As of December 31, 2022, we had cash, cash equivalents and marketable securities of $100.5 million.

On November 3, 2021, we entered into an Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or Jefferies, to provide for the offering, issuance and sale of up to an aggregate amount of $125.0 million of common stock from time to time in at-the-market offerings for which Jefferies acts as sales agent.

During the year ended December 31, 2022, we issued and sold 3,595,273 shares under the Sales Agreement for aggregate net proceeds of $9.6 million after deducting commissions and offering expenses payable by us.

As of December 31, 2022, we have issued and sold a total of 3,987,270 shares under the Sales Agreement for aggregate net proceeds of $16.6 million after deducting commissions and offering expenses payable by us.

Subsequent to December 31, 2022, we issued and sold a total of 2,942,083 shares under the Sales Agreement for aggregate net proceeds of $11.2 million after deducting commissions and offering expenses payable by us.

The following table provides information regarding our cash flows for each period presented (in thousands):

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Financing activities 10,465 107,586

Net (decrease) increase in cash, cash equivalents and restricted cash $ (157,488) $ 251,793

Net decrease in cash, cash equivalents and restricted cash $ (77,689) $ (157,488)

Operating Activities

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The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in operating assets and liabilities, which are primarily the result of increased expenses and timing of vendor payments.

During the year ended December 31, 2021, net cash used in operating activities of $124.6 million was primarily due to our $167.1 million net loss, partially offset by $26.4 million of non-cash charges primarily related to stock-based compensation, amortization of premiums and discounts on marketable securities and non-cash operating lease expense, and $16.1 million in changes in operating assets and liabilities primarily related to increases in accounts payable and accrued expenses.

During the year ended December 31, 2020, net cash used in operating activities of $52.6 million was primarily due to our $61.8 million net loss, partially offset by $6.0 million of non-cash charges primarily related to stock-based compensation and $3.2 million in changes in operating assets and liabilities primarily related to an increase in accrued expenses.

During the year ended December 31, 2022, net cash used in operating activities of $185.0 million was primarily due to our $214.0 million net loss and $1.8 million in changes in operating assets and liabilities primarily related to a decrease in accrued expenses, partially offset by $30.8 million of non-cash charges primarily related to stock-based compensation.

During the year ended December 31, 2021, net cash used in operating activities of $124.6 million was primarily due to our $167.1 million net loss, partially offset by $26.4 million of non-cash charges primarily related to stock-based compensation and $16.1 million in changes in operating assets and liabilities primarily related to increases in accounts payable and accrued expenses.

Investing Activities

During the year ended December 31, 2021, net cash used in investing activities of $140.5 million primarily related to the purchase of marketable securities, partially offset by the maturity of marketable securities.

There were no cash flows from investing activities during the year ended December 31, 2020.

During the year ended December 31, 2022, net cash provided by investing activities of $96.9 million primarily related to the maturities of marketable securities, partially offset by purchases of marketable securities.

Financing Activities

During the year ended December 31, 2021, net cash provided by financing activities of $107.6 million consisted of net proceeds from our follow-on public offering and at-the-market offerings of $105.7 million and net proceeds from the exercise of stock options of $2.4 million partially offset by the payment of issuance costs for our initial public offering, or IPO.

During the year ended December 31, 2020, net cash provided by financing activities of $304.4 million primarily consisted of net proceeds from our IPO and from the issuance of our Series C and Series C-1 redeemable convertible preferred stock, partially offset by our repurchase of Series C redeemable convertible preferred stock.

During the year ended December 31, 2022, net cash provided by financing activities of $10.5 million consisted of net proceeds from at-the-market offerings of $9.6 million and proceeds from purchases of common stock under our employee stock purchase plan and from the exercise of stock options of $1.4 million, partially offset by the payment of issuance costs for our at-the-market offerings and the payment of taxes related to the vesting of restricted stock units.

During the year ended December 31, 2021, net cash provided by financing activities of $107.6 million consisted of net proceeds from our follow-on public offering of $98.4 million and at-the-market offerings of $7.3 million and net proceeds from the exercise of stock options of $2.4 million, partially offset by the payment of issuance costs for our initial public offering.

Plan of Operation and Future Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we advance the preclinical activities and clinical trials of our product candidates.

In addition, we expect to incur additional costs associated with operating as a public company and as we transition from being an emerging growth company and a smaller reporting company.

As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future.

We anticipate that our expenses will increase substantially if and as we:

• advance the clinical development of our clinical-stage product candidates within our psychiatry, movement disorders and epilepsy franchises, respectively;

• advance the clinical development of our clinical-stage product candidates within our Cerebrum™ and Solidus™ platforms;

• advance the development of any additional product candidates;

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• potentially establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize any products for which we may obtain regulatory approval;

• add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts and to support our operations as a public company;

• when needed, add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts and to support our operations as a public company;

• experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.

We are unable to estimate the exact amount of our working capital requirements, but based on our current operating plan, we expect that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2023.

However, we have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect.

As of December 31, 2022 we had cash, cash equivalents and marketable securities of $100.5 million.

We are unable to estimate the exact amount of our working capital requirements, but based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of December 31, 2022, together with net proceeds raised under the Sales Agreement subsequent to December 31, 2022, will enable us to fund our operating expenses and capital expenditures into the first quarter of 2024.

We have incurred recurring losses since our inception, including a net loss of $214.0 million for the year ended December 31, 2022.

In addition, as of December 31, 2022, we had an accumulated deficit of $530.6 million.

We expect to continue to generate operating losses for the foreseeable future.

We have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year of the issuance of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

expect that our cash, cash equivalents and marketable securities as of December 31, 2022 will not be sufficient to fund operations for at least the next twelve months from the date of issuance of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, there is substantial doubt about our ability to continue as a going concern.

Our future viability is dependent on our ability to raise additional capital to finance our operations.

We expect to finance our operations through potential public or private equity financings, debt financings, collaboration agreements or other capital sources.

Our inability to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies.

There can be no assurance that the current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.

We have based our assessment on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Because of the numerous risks and uncertainties associated with product development and potential collaborations with third parties for the development of our product candidates, we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

Our funding requirements and timing and amount of our operating expenditures will depend on many factors, including, but not limited to:

• the scope, progress, results and costs of preclinical studies and clinical trials for our franchises and product candidates;

• the scope, progress, results and costs of preclinical studies and clinical trials for our platforms and product candidates;

• the number and characteristics of product candidates and technologies that we develop or may in-license;

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• the effect of competing technological and market developments;

• the impact of any business interruptions to our operations or to those of our manufacturers, suppliers or other vendors resulting from the COVID-19 pandemic or similar public health crisis;

• the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates, although we currently have no commitments or agreements to complete any such acquisitions or investments in businesses.

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We do not currently have any committed external source of funds.

Market volatility resulting from the COVID-19 pandemic or other factors could also adversely impact our ability to access capital as and when needed.

Market volatility could also adversely impact our ability to access capital as and when needed.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock.

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As of December 31, 2022, our operating lease commitments for the remainder of the lease term were $4.0 million.

In addition, we have entered into collaboration and license agreements with Purdue Neuroscience Company, or Purdue, RogCon Inc., or RogCon, and Ionis Pharmaceuticals, Inc., or Ionis, under which we could be obligated to pay certain fees, milestone payments and cost reimbursements.

Under our license agreement with Purdue, we are obligated to make future milestone payments of up to $33.0 million based on the achievement of specified development and sales milestones.

Furthermore, we are obligated to pay Purdue royalties of a low-single-digit percentage of annual net sales of licensed products.

Either party may terminate the license agreement for convenience or in the event of a material breach by the other party and failure to cure such breach within a certain period of time.

If the agreement is voluntarily terminated by Purdue, our license rights will survive such termination and such rights will become fully paid, perpetual and irrevocable.

See “Business—License Agreements—License Agreement with Purdue.”

Under our license agreement with RogCon, we are obligated to reimburse RogCon for its out-of-pocket costs incurred for activities performed under the license agreement.

In addition, we have entered into collaboration and license agreements with RogCon Inc., or RogCon, and Ionis Pharmaceuticals, Inc., or Ionis, under which we could be obligated to pay certain fees, milestone payments and cost reimbursements.

Under our license agreement with RogCon, Inc., or RogCon, we are obligated to reimburse RogCon for its out-of-pocket costs incurred for activities performed under the license agreement.

Additionally, we may be obligated to pay RogCon a milestone payment of $3.0 million and profit share payments.

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See “Business—License Agreements—License Agreement with RogCon.”

Under our collaboration agreement with Ionis, we are obligated to reimburse any out-of-pocket costs incurred by Ionis related to research activities, identification of a development candidate and conducting an investigational new drug application, or IND, enabling toxicology study.

Ionis granted us an exclusive option to obtain the rights and license to further develop and commercialize a development candidate in the field of epilepsy and neurodevelopmental disorders, other than Dravet Syndrome, following the results of the IND-enabling toxicology study.

Under our collaboration agreement with Ionis Pharmaceuticals, Inc., or Ionis,, we reimbursed Ionis for identifying a development candidate and conducting an investigational new drug application, or IND, enabling toxicology study, as well as out of pocket costs incurred by Ionis related to research activities.

Ionis granted us an exclusive option to obtain the rights and license to further develop and commercialize the development candidate in the field of epilepsy and neurodevelopmental disorders, other than Dravet Syndrome, following the results of the IND-enabling toxicology study.

We exercised this exclusive option in January 2022 and paid a $2.0 million license fee.

We may be required

to make additional payments to Ionis including development milestone payments, additional milestone payments and sales royalties or sublicense fees.

We may be required to make additional payments to Ionis including development milestone payments, additional milestone payments and sales royalties or sublicense fees.

Either party may terminate the collaboration agreement upon material breach or insolvency of the other party.

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however, some require advance payments.

We make estimates in determining our accrued and prepaid research and development expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us

at that time.

We make estimates in determining our accrued and prepaid research and development expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.

When evaluating the adequacy of the accrued liabilities and prepaid expenses, we analyze progress of the studies or trials related to these services, including the phase or completion of events, invoices received and contracted costs.

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Recently Issued Accounting Pronouncements

For a discussion of recent account of recent accounting standards, see Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, such standards will not have a material impact on our consolidated financial statements or do not otherwise apply to our current operations.

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