Praxis Precision Medicines, Inc. 10-Q

Item 1. Financial Statements. PRAXIS PRECISION MEDICINES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in thousands, except share and per share data) June 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 145,143 $ 81,300 Marketable securities 206,736 — Prepaid expenses and other current assets 4,837 3,580 Total current assets 356,716 84,880 Long-term marketable securities 81,952 — Property and equipment, net 369 588 Operating lease right-of-use assets 1,610 2,064 Other non-current assets 416 416 Total assets $ 441,063 $ 87,948 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 8,195 $ 5,815 Accrued expenses 10,058 7,416 Operating lease liabilities 1,191 1,126 Current portion of deferred revenue 1,176 1,392 Total current liabilities 20,620 15,749 Long-term liabilities: Non-current portion of operating lease liabilities 755 1,369 Non-current portion of deferred revenue 588 1,161 Total liabilities 21,963 18,279 Commitments and contingencies (Note 6) Stockholders’ equity: Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized and no shares issued or outstanding as of June 30, 2024 and December 31, 2023 — — Common stock, $ 0.0001 par value; 150,000,000 shares authorized; 17,755,506 shares issued and outstanding as of June 30, 2024, and 8,791,877 shares issued and outstanding as of December 31, 2023 14 13 Additional paid-in capital 1,145,308 723,577 Accumulated other comprehensive loss ( 71 ) — Accumulated deficit ( 726,151 ) ( 653,921 ) Total stockholders’ equity 419,100 69,669 Total liabilities and stockholders’ equity $ 441,063 $ 87,948 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 PRAXIS PRECISION MEDICINES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except share and per share data) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Collaboration revenue $ 357 $ 781 $ 788 $ 1,464 Operating expenses: Research and development 27,260 25,614 54,244 51,118 General and administrative 10,585 10,127 25,918 23,397 Total operating expenses 37,845 35,741 80,162 74,515 Loss from operations ( 37,488 ) ( 34,960 ) ( 79,374 ) ( 73,051 ) Other income: Other income, net 4,811 648 7,144 1,284 Total other income 4,811 648 7,144 1,284 Net loss $ ( 32,677 ) $ ( 34,312 ) $ ( 72,230 ) $ ( 71,767 ) Net loss per share attributable to common stockholders, basic and diluted 1 $ ( 1.74 ) $ ( 7.38 ) $ ( 4.41 ) $ ( 17.51 ) Weighted average common shares outstanding, basic and diluted 1 18,824,479 4,649,371 16,364,421 4,097,833 1 Results have been retroactively adjusted to reflect the 1-for-15 reverse stock split effected on November 28, 2023. See Note 2 for details. The accompanying notes are an integral part of these condensed consolidated financial statements. 2 PRAXIS PRECISION MEDICINES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (Amounts in thousands) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss $ ( 32,677 ) $ ( 34,312 ) $ ( 72,230 ) $ ( 71,767 ) Change in unrealized gain (loss) on marketable securities, net of tax ( 74 ) 19 ( 71 ) 173 Comprehensive loss $ ( 32,751 ) $ ( 34,293 ) $ ( 72,301 ) $ ( 71,594 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 3 PRAXIS PRECISION MEDICINES, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (Amounts in thousands, except share data) Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance at December 31, 2023 8,791,877 $ 13 $ 723,577 $ ( 653,921 ) $ — $ 69,669 Stock-based compensation expense — — 14,475 — — 14,475 Issuance of common stock from follow-on public offering and accompanying pre-funded warrants, net of underwriting discounts, commissions and offering costs of $ 10,836 3,802,025 — 161,649 — — 161,649 Issuance of common stock from at-the-market public offerings, net of issuance and commission costs of $ 376 209,852 — 6,169 — — 6,169 Issuance of common stock from a collaboration and license agreement 443,253 — 17,265 — — 17,265 Vesting of restricted stock units 11,095 — — — — — Shares withheld for taxes for vesting of restricted stock units ( 3,689 ) — ( 137 ) — — ( 137 ) Issuance of common stock upon exercise of stock options 3,634 — 143 — — 143 Change in unrealized gain on marketable securities, net of tax — — — — 3 3 Net loss — — — ( 39,553 ) — ( 39,553 ) Balance at March 31, 2024 13,258,047 $ 13 $ 923,141 $ ( 693,474 ) $ 3 $ 229,683 Stock-based compensation expense — — 5,878 — — 5,878 Issuance of common stock from follow-on public offering and accompanying pre-funded warrants, net of underwriting discounts, commissions and offering costs of $ 14,013 3,849,558 1 215,987 — — 215,988 Issuance of common stock from exercise of pre-funded warrants 622,123 — — — — — Issuance of common stock under employee stock purchase plan 25,146 — 311 — — 311 Vesting of restricted stock units 726 — — — — — Shares withheld for taxes for vesting of restricted stock units ( 242 ) — ( 13 ) — — ( 13 ) Issuance of common stock upon exercise of stock options 148 — 4 — — 4 Change in unrealized loss on marketable securities, net of tax — — — — ( 74 ) ( 74 ) Net loss — — — ( 32,677 ) — ( 32,677 ) Balance at June 30, 2024 17,755,506 $ 14 $ 1,145,308 $ ( 726,151 ) $ ( 71 ) $ 419,100 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 PRAXIS PRECISION MEDICINES, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued) (Unaudited) (Amounts in thousands, except share data) Common Stock 1 Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Equity Shares Amount Balance at December 31, 2022 3,292,163 $ 5 $ 606,918 $ ( 530,644 ) $ ( 173 ) $ 76,106 Stock-based compensation expense — — 7,593 — — 7,593 Issuance of common stock from at-the-market public offerings, net of commission costs of $ 560 560,253 1 18,095 — — 18,096 Vesting of restricted stock units 11,516 — — — — — Shares withheld for taxes for vesting of restricted stock units ( 2,875 ) — ( 127 ) — — ( 127 ) Issuance of common stock upon exercise of stock options 2,970 — 101 — — 101 Change in unrealized loss on marketable securities, net of tax — — — — 154 154 Net loss — — — ( 37,455 ) — ( 37,455 ) Balance at March 31, 2023 3,864,027 $ 6 $ 632,580 $ ( 568,099 ) $ ( 19 ) $ 64,468 Stock-based compensation expense — — 5,775 — — 5,775 Issuance of common stock from follow-on public offering and accompanying pre-funded warrants, net of underwriting discounts, commissions and offering costs of $ 4,484 4,296,646 6 63,433 — — 63,439 Issuance of common stock from at-the-market public offerings, net of issuance costs 392,541 1 6,031 — — 6,032 Issuance of common stock under employee stock purchase plan 15,663 — 208 — — 208 Vesting of restricted stock units 720 — — — — — Shares withheld for taxes for vesting of restricted stock units ( 249 ) — ( 4 ) — — ( 4 ) Change in unrealized loss on marketable securities, net of tax — — — — 19 19 Net loss — — — ( 34,312 ) — ( 34,312 ) Balance at June 30, 2023 8,569,348 $ 13 $ 708,023 $ ( 602,411 ) $ — $ 105,625 1 Results have been retroactively adjusted to reflect the 1-for-15 reverse stock split effected on November 28, 2023. See Note 2 for details. The accompanying notes are an integral part of these condensed consolidated financial statements. 5 PRAXIS PRECISION MEDICINES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands) Six Months Ended June 30, 2024 2023 Cash flows from operating activities: Net loss $ ( 72,230 ) $ ( 71,767 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 219 212 Stock-based compensation expense 20,353 13,368 Non-cash operating lease expense 454 407 Amortization of premiums and discounts on marketable securities, net ( 1,615 ) 47 Non-cash collaboration and license agreement expense 2,500 — Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 1,257 ) 4,822 Accounts payable 2,189 ( 6,662 ) Accrued expenses 2,593 ( 2,533 ) Operating lease liabilities ( 549 ) ( 490 ) Deferred revenue ( 789 ) ( 1,464 ) Other ( 3 ) — Net cash used in operating activities ( 48,135 ) ( 64,060 ) Cash flows from investing activities: Purchases of marketable securities ( 290,142 ) — Maturities of marketable securities 3,000 39,000 Net cash (used in) provided by investing activities ( 287,142 ) 39,000 Cash flows from financing activities: Issuance of common stock from follow-on public offering and accompanying pre-funded warrants, net of underwriting discounts, commissions and offering costs 377,744 63,439 Issuance of common stock from collaboration and license agreement 14,765 — Proceeds from at-the-market offerings, net of issuance and commission costs 6,303 24,128 Payments of tax withholdings related to vesting of restricted stock units ( 150 ) ( 131 ) Proceeds from exercise of stock options and employee stock purchase plan purchases 458 309 Net cash provided by financing activities 399,120 87,745 Increase in cash, cash equivalents and restricted cash 63,843 62,685 Cash, cash equivalents and restricted cash, beginning of period 81,716 62,031 Cash, cash equivalents and restricted cash, end of period $ 145,559 $ 124,716 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents 145,143 124,300 Restricted cash 416 416 Total cash, cash equivalents and restricted cash $ 145,559 $ 124,716 Supplemental disclosures of non-cash activities: Issuance costs from at-the-market offering included in accounts payable and accrued expenses $ 134 $ — Offering costs from follow-on offering included in accounts payable $ 108 $ 259 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 PRAXIS PRECISION MEDICINES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Nature of the Business Praxis Precision Medicines, Inc. (“Praxis” or the “Company”) is a clinical-stage biopharmaceutical company translating insights from genetic epilepsies into the development of therapies for central nervous system ("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. The Company is applying genetic insights to the discovery and development of therapies for neurological disorders through two proprietary platforms, using its understanding of shared biological targets and circuits in the brain. Each platform has multiple programs currently, with significant potential for additional program and indication expansion: • Cerebrum ™, the Company's 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 ™, the Company's antisense oligonucleotide, or ASO, platform, is an efficient, targeted precision medicine discovery and development engine anchored on a proprietary, computational methodology The Company's 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, the Company has established a diversified, multimodal CNS portfolio with four clinical-stage product candidates across movement disorders and epilepsy. For the Company's most advanced product candidate under the Cerebrum™ platform, ulixacaltamide, two Phase 3 Essential3 clinical trials in essential tremor are ongoing. The Company is planning to conduct an interim analysis in the fourth quarter of 2024, with topline results anticipated shortly thereafter. Within the Company's PRAX-628 program, it announced positive results from its Photo-Paroxysmal Response ("PPR") study in the first quarter of 2024, and plans to initiate four studies to generate patient eligibility, efficacy, safety and pharmacokinetics (PK) data for the program. The Company intends to initiate an observational study of PRAX-628 in patients with epilepsy in the third quarter of 2024, as well as three efficacy studies. The first efficacy study will be an open label eight-week study in patients with focal onset seizures or generalized epilepsy to be initiated in the second half of 2024, with topline results expected in the first half of 2025. The Company also plans to initiate a double-blind, placebo-controlled, 12-week study in focal onset seizures in the fourth quarter of 2024, with topline results expected in the second half of 2025, and plans to initiate a third efficacy study in the first half of 2025. The Company's relutrigine (formerly known as PRAX-562) Phase 2 EMBOLD study was initiated in the first quarter of 2023, with two cohorts in SCN2A-DEE and SCN8A- DEE; topline results are expected for both cohorts in the third quarter of 2024. For the Company's most advanced product candidate under the Solidus™ platform, elsunersen (formerly known as PRAX-222), it shared results from Part 1 of the EMBRAVE study in the fourth quarter of 2023, and has initiated the first arm of the global confirmatory study in Brazil. It is currently completing multiple global regulatory interactions to further expand the pivotal phase of the program later in 2024. Praxis was incorporated in 2015 and commenced operations in 2016. The Company has funded its operations primarily with proceeds from the issuance of redeemable convertible preferred stock, from the sale of common stock through an initial public offering and at-the-market offerings under its shelf registration statement, and from follow-on public offerings of common stock and pre-funded warrants to purchase common stock. From inception through June 30, 2024, the Company raised $ 1.0 billion in aggregate cash proceeds from these transactions, net of issuance costs. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate 7 personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales. Liquidity In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) , the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. The Company has incurred recurring losses since its inception, including a net loss of $ 72.2 million for the six months ended June 30, 2024. In addition, as of June 30, 2024, the Company had an accumulated deficit of $ 726.2 million. The Company expects to continue to generate operating losses for the foreseeable future. The Company expects that its cash, cash equivalents and marketable securities as of June 30, 2024 of $ 433.8 million will be sufficient to fund its operating expenditures and capital expenditure requirements necessary to advance its research efforts and clinical trials for at least one year from the date of issuance of these condensed consolidated financial statements. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. The Company's inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its 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 the Company, or at all. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and ASUs of the FASB. The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 30, 2024 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company's 2023 Annual Report on Form 10-K, other than as noted below. Reverse Stock Split On November 28, 2023, the Company filed a Certificate of Amendment to the Company's Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-15 reverse stock split of its common stock (the "Reverse Stock Split"). The Reverse Stock Split became effective at 5:00 p.m., Eastern Time, on November 28, 2023 (the "Effective Time"). As a result of the Reverse Stock Split, every 15 shares of the Company's issued and outstanding common stock were automatically reclassified into one validly issued, fully-paid and non-assessable share of common stock. Any fractional post-split shares as a result of the Reverse Stock Split were rounded down to the nearest whole post-split share. The Reverse Stock Split did not affect the number of authorized shares of common stock or the par value of the common stock. All share amounts and per share amounts for the periods prior to the Effective Time disclosed in this Quarterly Report on Form 10-Q have been restated to reflect the Reverse Stock Split on a retroactive basis. Marketable Securities Classification The Company may invest its excess cash in money market funds and debt instruments of the U.S. Treasury, financial institutions, corporations and U.S. government agencies with strong credit ratings and an investment grade rating at or above A-1 or P-1 by two of the three nationally recognized statistical rating organizations. The Company does not believe that it is exposed to more than a nominal amount of credit risk related to any marketable securities it may invest in. The Company has established guidelines relative to diversification and maturities that maintain 8 safety and liquidity, and periodically reviews and modifies these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity. The Company classifies its investments in debt instruments as available-for-sale. Available-for-sale investments are reported at fair value at each balance sheet date, and include any unrealized holding gains and losses in accumulated other comprehensive loss, a component of stockholders’ equity. Realized gains and losses are included in the Company's condensed consolidated statements of operations. All of the Company's available-for-sale securities are available for use in its current operations. The Company classifies marketable securities as either cash equivalents, short-term, or long-term based on their stated maturity dates as it is more-likely-than-not that the Company will hold these assets through to their maturity dates. Unaudited Interim Condensed Consolidated Financial Information The accompanying condensed consolidated balance sheet as of June 30, 2024, the condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023, the condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2024 and 2023, the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023 and the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2024 and 2023 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements, and in the opinion of management reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of June 30, 2024, the results of its operations for the three and six months ended June 30, 2024 and 2023 and its cash flows for the six months ended June 30, 2024 and 2023. Financial statement disclosures for the three and six months ended June 30, 2024 and 2023 are condensed and do not include all disclosures required for an annual set of financial statements in accordance with GAAP. The results for the three and six months ended June 30, 2024 are not necessarily indicative of results to be expected for the year ended December 31, 2024, any other interim periods, or any future year or period. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, accrued and prepaid research and development expense, collaboration revenue, stock-based compensation expense and the recoverability of the Company’s net deferred tax assets and related valuation allowance. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates. Common Stock Warrants The Company accounts for warrants to purchase shares of its common stock in accordance with the guidance in FASB ASC No. 480, Distinguishing Liabilities from Equity (ASC 480) and ASC No. 815, Derivatives and Hedging (ASC 815). The Company classifies warrants issued for the purchase of shares of its common stock as either equity or liability instruments based on an assessment of the specific terms and conditions of each respective contract. Such assessment includes determining whether the warrants are freestanding financial instruments or embedded in a host instrument, whether the warrants are liabilities within the scope of ASC 480, whether the warrants meet the definition of a derivative in ASC 815 and whether the warrants meet the requirements for equity classification pursuant to the indexation and equity classification criteria in ASC 815. The Company determines the classification for its warrants at the time of issuance and updates its assessment, as necessary. Warrants that meet all of the criteria for equity classification are recorded as a component of additional paid-in capital. Net Loss per Share Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The calculation of weighted average number of common shares outstanding excludes shares of restricted common stock that are not vested but includes shares of common stock underlying pre-funded warrants. Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period, after giving consideration to the dilutive effect of potentially dilutive common 9 shares. For purposes of this calculation, outstanding options to purchase shares of common stock, unvested shares of restricted common stock and potential shares issuable under the 2020 ESPP are considered potentially dilutive common shares. The Company has generated a net loss in all periods presented so the basic and diluted net loss per share are the same, as the inclusion of the potentially dilutive securities would be anti-dilutive. Recent Accounting Pronouncements Recently Issued Accounting Pronouncements On November 27, 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures . ASU No. 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments included in this ASU apply to all public entities that are required to report segment information in accordance with Topic 280, including those with a single reportable segment. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and should be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expenses categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company only has one reportable segment and this ASU impacts disclosures only. The Company has determined that the effects of adopting the amendments in ASU 2023-07 will only impact its disclosures and not have a material impact on its consolidated financial position and the results of its operations when such amendment is adopted. On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures . ASU No. 2023-09 provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and incomes taxes paid information. For public companies, the amendments are effective for annual periods beginning after December 15, 2024 and should be applied prospectively. The Company has determined that the effects of adopting the amendments in ASU 2023-09 will only impact its disclosures and will not have a material impact on its consolidated financial position and the results of its operations when such amendment is adopted. 3. Cash Equivalents and Marketable Securities The following is a summary of the Company's investment portfolio as of June 30, 2024 (in thousands). The Company did not hold any cash equivalents or marketable securities as of December 31, 2023. As of June 30, 2024 Gross Unrealized Estimated Cost Gains Losses Fair Value Cash equivalents: Money market funds $ 35,120 $ — $ — $ 35,120 Debt securities issued by U.S. government agencies 8,980 — — 8,980 Corporate debt securities 4,270 — — 4,270 Commercial paper 4,977 — ( 2 ) 4,975 Available-for-sale marketable securities: Debt securities issued by U.S. government agencies 178,097 — ( 10 ) 178,087 Corporate debt securities 88,089 — ( 34 ) 88,055 Commercial paper 14,499 — ( 11 ) 14,488 Other debt securities 8,072 — ( 14 ) 8,058 Total cash equivalents and marketable securities $ 342,104 $ — $ ( 71 ) $ 342,033 As of June 30, 2024, the Company had 119 securities with a total fair market value of $ 227.0 million in an unrealized loss position. The Company believes that any unrealized losses associated with the decline in value of its securities is temporary and primarily related to the change in market interest rates since purchase, and believes that it is more likely than not that it will be able to hold its debt securities to maturity. The Company anticipates a full recovery of the amortized cost basis of its debt securities at maturity and an allowance was not recognized. Contractual maturities of the marketable securities at each balance sheet date are as follows (in thousands): 10 June 30, 2024 December 31, 2023 Within one year $ 224,961 $ — After one year through five years 81,952 — Total $ 306,913 $ — Securities are evaluated for impairment at the end of each reporting period. The Company did not record any impairment related to its available-for-sale securities during the three and six months ended June 30, 2024 and 2023. 4. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The Company categorizes financial assets measured at fair value based on a fair value hierarchy. The following fair value hierarchy is used to classify financial assets based on observable inputs and unobservable inputs used to value the financial assets: • Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets; • Level 2: Quoted prices for similar assets in active markets, quoted prices in markets that are not active, or inputs which are unobservable, either directly or indirectly, for substantially the full term of the asset; or • Level 3: Prices or valuation techniques that require inputs that are both significant to the valuation of the asset and unobservable. The following table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values as of June 30, 2024 (in thousands). The Company did not hold any financial assets measured at fair value on a recurring basis as of December 31, 2023. As of June 30, 2024 Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 35,120 $ — $ — $ 35,120 Debt securities issued by U.S. government agencies 8,980 — — 8,980 Corporate debt securities — 4,270 — 4,270 Commercial paper — 4,975 — 4,975 Available-for-sale marketable securities: Debt securities issued by U.S. government agencies 178,087 — — 178,087 Corporate debt securities — 88,055 — 88,055 Commercial paper — 14,488 — 14,488 Other debt securities — 8,058 — 8,058 $ 222,187 $ 119,846 $ — $ 342,033 5. Accrued Expenses Accrued expenses consisted of the following (in thousands): 11 June 30, 2024 December 31, 2023 Accrued external research and development expenses $ 7,353 $ 2,957 Accrued personnel-related expenses 2,064 3,716 Accrued other expenses 641 743 Total accrued expenses $ 10,058 $ 7,416 6. Commitments and Contingencies In May 2021, the Company entered into a sublease agreement for office space located in Boston, Massachusetts that expires on January 31, 2026, with no option to renew or terminate early. The base rent increases by approximately 2 % annually. The Company issued a letter of credit to the landlord related to the security deposit, secured by restricted cash, which is reflected within other non-current assets on the accompanying condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023. This lease qualifies as an operating lease. 7. Collaboration and License Agreements UCB Option and License Agreement In December 2022, the Company entered into an Option and License Agreement (“the Collaboration Agreement”) with UCB Biopharma SRL (“UCB”) for the discovery of small molecule therapeutics as potential treatments of KCNT1-related epilepsies. Under the terms of the Collaboration Agreement, the Company has agreed to perform general biology-related research services as part of a mutually agreed upon research plan in exchange for a $ 5.0 million upfront payment. In addition, the Company provided UCB an exclusive option to in-license global development and commercialization rights to any resulting KCNT1 small molecule development candidate identified as part of the research plan. If UCB exercises its option to in-license global development and commercialization rights, the Collaboration Agreement stipulates that UCB will assume research, development, manufacturing and commercialization responsibilities and costs. Under the terms of the Collaboration Agreement, the Company will be eligible to receive an option fee and future success-based development and commercialization milestone payments, totaling up to $ 98.5 million, in addition to tiered royalties on net sales of any resulting products from the Collaboration Agreement. The Company concluded that UCB is a customer, and as such, the arrangement falls within the scope of Topic 606. At the commencement of the Collaboration Agreement, the Company identified one performance obligation, which was to perform the research services for UCB. The Company determined the transaction price to be $ 5.0 million, comprised of the upfront payment it received. The option provided to UCB was determined not to be a material right. The Company recognizes revenue for its research services performance obligation over time using an input method over the duration of the research services. During the three and six months ended June 30, 2024, the Company recognized $ 0.4 million and $ 0.8 million, respectively, in collaboration revenue related to the Collaboration Agreement in the condensed consolidated statement of operations. As of June 30, 2024, $ 1.8 million was included in deferred revenue in the condensed consolidated balance sheet, of which $ 1.2 million was classified as current. 12 Tenacia Collaboration and License Agreement On January 4, 2024, the Company entered into an exclusive collaboration and license Agreement (“the License Agreement”) with Tenacia Biotechnology (Shanghai) Co., Ltd. (“Tenacia”), a China-based portfolio company of Bain Capital, which provides Tenacia an exclusive license to use certain intellectual property for the development and commercialization of ulixacaltamide and products containing ulixacaltamide in China, Hong Kong, Macau and Taiwan. Tenacia is solely responsible for the development and commercialization under the arrangement, with the exception of the associated manufacturing. The Company also entered into a Stock Purchase Agreement (“the Stock Purchase Agreement”) with BCPE Tenet Holdings Cayman, Ltd. (“BCPE”), a related party of Tenacia. Pursuant to the terms of the License Agreement, the Company was entitled to an up-front, non-refundable and non-creditable cash payment of $ 5.0 million, net of certain tax withholdings. In addition, the Company is eligible to receive $ 264.0 million in success-based development and commercialization milestone payments as well as tiered royalties on net sales. Pursuant to the terms of the Stock Purchase Agreement, the Company issued and sold 443,253 shares of its common stock to BCPE at a price per share of $ 22.5605 for aggregate gross proceeds of $ 10.0 million. The per share price was based on a 20 % premium over the 30-day volume-weighted average price. Under the terms of the License Agreement, the Company granted to Tenacia an exclusive license to use certain intellectual property for the development and commercialization of ulixacaltamide and products containing ulixacaltamide in China, Hong Kong, Macau and Taiwan. Tenacia is solely responsible for the development and commercialization under the arrangement, with the exception of the associated manufacturing. The Company concluded that the License Agreement and the Stock Purchase Agreement is a combined arrangement since they were executed at the same time and in contemplation of each other with the same counterparty or a related party thereof and the combined arrangement falls within the scope of Topic 606. The Company’s obligations under the arrangement comprise a single promise, or one performance obligation, related to the exclusive development and commercialization license granted to Tenacia. Total proceeds associated with the combined arrangement at inception were $ 14.8 million consisting of the following: (i) $ 10.0 million gross proceeds from the sale of common stock under the Stock Purchase Agreement and (ii) $ 4.8 million, net of tax, related to the up-front payment under the License Agreement, both of which were received in January 2024. During the three and six months ended June 30, 2024, the Company had not achieved any development or sales milestones or earned any royalties under the License Agreement. The Company recorded the common stock sold to BCPE at its issuance date fair value of $ 38.95 per share, or $ 17.3 million in the aggregate, which exceeded the proceeds received which were calculated based on the 20 % premium over the prior 30-day volume-weighted average price. Accordingly, there is no transaction price allocable to the performance obligation. The Company accounted for the excess of the fair value of the equity securities issued over the total proceeds received as consideration paid to a customer for which no distinct good or service was transferred in exchange. As a result, the transaction gives rise to negative revenue on a cumulative basis in the amount of $ 2.5 million, which was recorded in research and development expense in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2024. For agreements where the licenses are considered separate performance obligations or represent the only performance obligation, the Company recognizes revenue at the point in time that the Company effectively grants the license, as the licenses or assignments represent functional intellectual property. As of June 30, 2024, the Company did not have any receivables or deferred revenue related to the arrangement with Tenacia. The Company did not recognize any contract assets related to costs to obtain a contract with a customer or costs to fulfill a contract with a customer through June 30, 2024 because no qualifying costs were incurred. During the three and six months ended June 30, 2024, the Company did not recognize any revenue associated with the combined arrangement. 8. Common Stock and Preferred Stock Reverse Stock Split On November 28, 2023, the Company filed a Certificate of Amendment to the Company's Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-15 reverse stock split of its common stock. The Reverse Stock Split became effective at 5:00 p.m., Eastern Time, on November 28, 2023. As a result of the Reverse Stock Split, every 15 shares of the Company's issued and outstanding common stock were automatically reclassified into one validly issued, fully-paid and non-assessable share of common stock. Any fractional post-split shares as a result of the Reverse Stock Split were rounded down to the nearest whole post- 13 split share. The Reverse Stock Split did not affect the number of authorized shares of common stock or the par value of the common stock. All share amounts and per share amounts for the period prior to the Effective Time disclosed in this Quarterly Report on Form 10-Q have been restated to reflect the Reverse Stock Split on a retroactive basis. Common Stock As of June 30, 2024 and December 31, 2023, the authorized capital stock of the Company included 150,000,000 shares of common stock, $ 0.0001 par value. As of June 30, 2024 and December 31, 2023, the Company did no t hold any treasury shares. Follow-On Public Offerings June 2023 Public Offering On June 21, 2023, the Company completed a public offering of: (i) an aggregate of 4,296,646 shares of its common stock at a public offering price of $ 14.25 per share, including the underwriters’ full exercise of their option to purchase 619,979 additional shares of common stock, and (ii) pre-funded warrants to purchase 470,000 shares of common stock at a public offering price of $ 14.2485 per share of common stock underlying the warrants. The purchase price per share for each pre-funded warrant represents the per share offering price for the common stock, less the $ 0.0015 per share exercise price for each underlying share. Total net proceeds generated from the offering were approximately $ 63.4 million, after deducting underwriting discounts, commissions and other offering expenses payable by the Company. During the three months ended June 30, 2024, all pre-funded warrants associated with this offering were exercised via a cashless exercise, resulting in 469,981 shares of common stock issued. No cash proceeds associated with the exercise were received by the Company. As of June 30, 2024, there were no pre-funded warrants associated with this offering outstanding. January 2024 Public Offering On January 16, 2024, the Company completed a public offering of: (i) an aggregate of 3,802,025 shares of its common stock at a public offering price of $ 35.50 per share, including the underwriters' full exercise of their option to purchase 633,750 additional shares of commons stock, and (ii) pre-funded warrants to purchase 1,056,725 shares of common stock at a public offering price of $ 35.4999 per share of common stock underlying the warrants. The purchase price per share of each pre-funded warrant represents the per share offering price for the common stock, less the $ 0.0001 per share exercise price of each underlying share. Total net proceeds generated from the offering were approximately $ 161.6 million, after deducting underwriting discounts, commissions and other offering expenses payable by the Company. The pre-funded warrants are exercisable at any time on or after the date of issuance at the option of the holder, subject to a beneficial ownership blocker that may limit exercisability. No holder may exercise any portion of the warrants that would cause the aggregate number of shares of common stock beneficially owned by such holder, together with its affiliates, to exceed 4.99 % (or 9.99 %) of the issued and outstanding common stock. A holder of a pre-funded warrant may increase or decrease this percentage up to 19.99 % by providing at least 61 days’ prior notice to the Company. The pre-funded warrants do not expire. The pre-funded warrants may be settled through either physical or net share settlement. Following the occurrence of certain fundamental transactions, the holders of the pre-funded warrants have the right to receive upon exercise of the warrants the same amount and kind of securities, cash, or property as they would have been entitled to receive if they had been holders of the common shares issuable under the warrants immediately prior to such transaction. During the three months ended June 30, 2024, 152,145 pre-funded warrants were exercised via a cashless exercise, resulting in 152,142 shares of common stock issued. No cash proceeds associated with the exercise were received by the Company. As of June 30, 2024, a total of 904,580 pre-funded warrants associated with this offering remained outstanding. April 2024 Public Offering On April 2, 2024 the Company completed a public offering of: (i) an aggregate of 3,849,558 shares of its common stock at a public offering price of $ 56.50 per share, including the underwriters' full exercise of their option to purchase 530,973 additional shares of common stock, and (ii) pre-funded warrants to purchase 221,238 shares of common stock at a public offering price of $ 56.4999 per share of common stock underlying the warrants. The purchase price per share for each pre-funded warrant represents the per share offering price for the common stock, 14 less the $ 0.0001 per share exercise price of each underlying share. Total net proceeds generated from the offering were approximately $ 216.0 million, after deducting underwriting discounts, commissions and other offering expenses payable by the Company. The pre-funded warrants are exercisable at any time on or after the date of issuance at the option of the holder, subject to a beneficial ownership blocker that may limit exercisability. No holder may exercise any portion of the warrants that would cause the aggregate number of shares of common stock beneficially owned by such holder, together with its affiliates, to exceed 4.99 % (or 9.99 %) of the issued and outstanding common stock. A holder of a pre-funded warrant may increase or decrease this percentage up to 19.99 % by providing at least 61 days’ prior notice to the Company. The pre-funded warrants do not expire. The pre-funded warrants may be settled through either physical or net share settlement. Following the occurrence of certain fundamental transactions, the holders of the pre-funded warrants have the right to receive upon exercise of the warrants the same amount and kind of securities, cash, or property as they would have been entitled to receive if they had been holders of the common shares issuable under the warrants immediately prior to such transaction. As of June 30, 2024, none of the pre-funded warrants had been exercised and all remained outstanding. The Company determined that the pre-funded warrants related to the June 2023, January 2024, and April 2024 public offerings are freestanding financial instruments because they are both legally detachable and separately exercisable from the common stock sold in the offering. As such, the Company evaluated the pre-funded warrants to determine whether they represent instruments that require liability classification pursuant to the guidance in ASC 480. However, the Company concluded that the pre-funded warrants are not a liability within the scope of ASC 480 due to their characteristics. Further, the Company determined that the pre-funded warrants do not meet the definition of a derivative under ASC 815 because they do not meet the criteria regarding no or little initial net investment. Accordingly, the Company assessed the pre-funded warrants relative to the guidance in ASC No. 815-40, Contracts in Entity’s Own Equity , to determine the appropriate treatment. The Company concluded that the pre-funded warrants are both indexed to its own stock and meet all other conditions for equity classification. Accordingly, the Company has classified the pre-funded warrants as permanent equity. Shares Reserved for Future Issuance The Company has reserved the following shares of common stock for future issuance: June 30, 2024 December 31, 2023 Shares reserved for exercise of outstanding stock options 1,134,459 666,163 Shares reserved for exercise of pre-funded warrants related to the June 2023 Financing — 470,000 Shares reserved for exercise of pre-funded warrants related to the January 2024 Financing 904,580 — Shares reserved for exercise of pre-funded warrants related to the April 2024 Financing 221,238 — Shares reserved for future awards under the 2020 Stock Option and Incentive Plan 936,662 148,264 Shares reserved for future awards under the 2020 Employee Stock Purchase Plan 115,883 53,111 Shares reserved for future awards under the 2024 Inducement Plan 112,249 — Shares reserved for vesting of restricted stock units 101,462 47,145 Total shares of authorized common stock reserved for future issuance 3,526,533 1,384,683 Preferred Stock As of June 30, 2024 and December 31, 2023, the authorized capital stock of the Company included 10,000,000 shares of undesignated preferred stock, $ 0.0001 par value. 9. Stock-Based Compensation 2024 Inducement Plan In January 2024, the Board of Directors ("the Board") adopted the 2024 Inducement Plan (the "Inducement Plan") without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules ("Rule 5635(c)(4)"). In accordance with Rule 5635(c)(4), the Inducement Plan allows the Company to grant awards only to a newly hired employee who was not previously an employee or non-employee director or to an employee who is being rehired following a bona fide period of non-employment if such award is a material inducement to such employee entering into employment. The total shares of common stock initially authorized for issuance under the 15 Inducement Plan was 1,000,000 . In June 2024, the common stock authorized for issuance under the Inducement Plan was reduced by 870,000 shares following stockholder approval of an increase in the shares available for grant under the 2020 Stock Option and Incentive Plan (the "2020 Plan"). The total number of shares of common stock authorized for issuance under the Inducement Plan as of June 30, 2024 was 130,000 shares. 2020 Stock Option and Incentive Plan The total number of shares of common stock authorized for issuance under the 2020 Plan as of June 30, 2024 and December 31, 2023 was 1,970,833 shares and 661,240 shares, respectively. 2017 Stock Incentive Plan The total number of shares of common stock authorized for issuance under the 2017 Stock Incentive Plan (the "2017 Plan") as of June 30, 2024 and December 31, 2023 was 395,850 shares. Any authorization to issue new options under the 2017 Plan was cancelled upon the effectiveness of the 2020 Plan and no further awards will be granted under the 2017 Plan. 2020 Employee Stock Purchase Plan The total number of shares of common stock authorized for issuance under the 2020 Employee Stock Purchase Plan (the "2020 ESPP”) as of June 30, 2024 and December 31, 2023 was 175,145 shares and 87,227 shares, respectively. Restricted Stock Units The following table summarizes the Company’s restricted stock unit activity: Shares Weighted Average Grant Date Fair Value Unvested as of December 31, 2023 47,145 $ 202.27 Issued 71,634 44.37 Vested ( 11,805 ) 309.19 Forfeited ( 5,512 ) 59.05 Unvested as of June 30, 2024 101,462 $ 86.13 As of June 30, 2024, total unrecognized compensation cost related to unvested restricted stock units was $ 6.8 million, which is expected to be recognized over a weighted-average period of 2.28 years. Stock Options The following table summarizes the Company’s stock option activity: Number of Shares Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (In years) (In thousands) Outstanding as of December 31, 2023 666,163 $ 160.19 Granted 488,646 43.65 Exercised ( 3,782 ) 38.75 $ 41 Cancelled or Forfeited ( 16,568 ) 134.35 Outstanding as of June 30, 2024 1,134,459 $ 110.77 8.26 $ 1,712 Exercisable as of June 30, 2024 715,308 $ 130.91 7.84 $ 950 Vested and expected to vest as of June 30, 2024 1,134,459 $ 110.77 8.26 $ 1,712 Valuation of Stock Options 16 The weighted-average assumptions that the Company used in the Black-Scholes option pricing model to determine the grant-date fair value of stock options granted to employees and non-employees on the date of grant were as follows for the three and six months ended June 30, 2024: Three Months Ended June 30, Six Months Ended June 30, 2024 2024 Risk-free interest rate 4.35 % 3.94 % Expected term (in years) 6.00 6.01 Expected volatility 98.35 % 89.93 % Expected dividend yield — % — % Weighted average grant-date fair value per share $ 36.61 $ 33.18 As of June 30, 2024, total unrecognized compensation cost related to unvested stock options was $ 22.0 million, which is expected to be recognized over a weighted-average period of 1.76 years. Stock-Based Compensation Stock-based compensation expense was allocated as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Research and development $ 2,060 $ 1,918 $ 7,658 $ 4,141 General and administrative 3,818 3,857 12,695 9,227 Total stock-based compensation expense $ 5,878 $ 5,775 $ 20,353 $ 13,368 10. Net Loss per Share The following potential common shares, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have been anti-dilutive: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Outstanding stock options 1,134,459 674,279 1,134,459 674,279 Unvested restricted stock units 101,462 43,824 101,462 43,824 Potential shares issuable under the 2020 ESPP 7,395 10,758 7,395 10,758 1,243,316 728,861 1,243,316 728,861 Common shares issuable upon exercise of the pre-funded warrants that were sold in connection with the June 2023, January 2024, and April 2024 underwritten public offering are included in the calculation of basic weighted average number of common shares outstanding for the three and six months ended June 30, 2024. Consistent with the guidance in ASC 260-10-45-13, the underlying common shares are issuable for little to no consideration and there are no vesting conditions or contingencies associated with the warrants. Accordingly, the aggregate number of common shares underlying the pre-funded warrants have been considered outstanding for purposes of the calculation of basic net loss per share from the date of issuance. 11. Related Party Transactions On September 11, 2019, the Company entered into a Cooperation and License Agreement (the “License Agreement”) with RogCon Inc. (“RogCon”). Under the License Agreement, RogCon granted to the Company an exclusive, worldwide license under RogCon's intellectual property to research, develop and commercialize products for the treatment of all forms of epilepsy and/or neurodevelopmental disorders in each case caused by any mutation of the SCN2A gene. Pursuant to the terms of the License Agreement, the Company will conduct, at its own cost and expense, the research and development activities assigned to it under the associated research plan. In addition, the Company is responsible for reimbursing RogCon for any costs associated with research and development activities 17 RogCon performs at the request of the Company. One of the founders of RogCon became the Company's General Counsel in June 2020. The Company continues to reimburse RogCon for its out-of-pocket costs incurred for activities performed under the License Agreement. Expenses incurred during all periods presented were not material. 12. Subsequent Events The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the condensed consolidated financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. The Company has concluded that no subsequent events have occurred that require disclosure. 18